JOHANNESBURG (miningweekly.com) – While gold producer Gold Fields was restructuring its operations to make the company more sustainable at the current gold price, it was still focused on growth, Gold Fields CEO Nick Holland said on Thursday.

Speaking at a presentation of the company’s results for the three months and year ended December 31, he said, during 2013, $450-million had been removed from Gold Fields’ cost, capital, exploration and project expenditure through various measures such as eliminating marginal mining and cancelling uneconomic brownfield expansions.

Gold Fields had also rationalised its corporate, regional and operational structures, and implemented general cost savings and improved efficiencies.

“However, we have not stopped development and the stripping of our pits to make sure that the company’s future plans are not compromised. We want to make sure that we maintain [the] structural integrity of our operations and will continue to spend money on that,” Holland said.

He explained that the cost reductions, therefore, did not mean that the company was not focused on growth; however, it was focused on the kind of growth that could deliver for Gold Fields in the short to medium term.

“We don’t see ourselves as having 20 greenfield exploration projects around the world, which was what Gold Fields was in 2012. We are going to be a very different Gold Fields focused on the countries we want to be [in] and the mineralisation that will add the best value to us,” Holland said.

He further highlighted that the company’s achievement of increasing production, while simultaneously dropping the all-in sustainable cost, set Gold Fields up to be much more sustainable at the current gold price.

Quarter-on-quarter Gold Fields’ gold production increased by 21% to 598 000 oz with all-in sustaining costs declining by 3% quarter-on-quarter and 24% year-on-year to $1 054/oz.  The quarter’s total all-in cost, at $1 095/oz, was 7% lower quarter-on-quarter.

“We are not restructuring as a business hoping that the gold price is going to recover, we are restructuring expecting that $1 300/oz is what we have to work with in the foreseeable future,” Holland said, adding that while the price could improve in the longer term, over the next year or two, “this may be as good as it gets”.

He also added that the company’s plans were such that it would not break even at a gold price of $1 300/oz, but rather that it would still have a 15% profit margin. Therefore, the company would still be able to sustain itself even if the price were to drop as low as $1 100/oz.

“We are prepared should the gold price fall even more before it [rises],” Holland stated.

OPERATIONS
Gold Fields’ increased production during the fourth quarter of 2013 was mostly owing to the successful integration of the Yilgarn South assets, in Western Australia, into the company’s portfolio.

Yilgarn South contributed 114 000 oz during the quarter, at an aggregate all-in cost of less than $1 000/oz.

Holland further pointed out that Gold Fields’ Damang operation, in Ghana, had also increased its production by 39% quarter-on-quarter to 45 000 oz, while the mine’s all-in cost declined by 27% to $1 261/oz, creating a platform for further improvements in future.

The group’s South Deep mine, in South Africa, was also moving closer to its targeted break-even point with all-in costs of $1 436/oz reflecting a 10% quarter-on-quarter improvement.

Following a build-up review, concluded earlier this month, Gold Fields had identified three main areas requiring improvement at South Deep to up the mine’s production.

Gold Fields decided that it had to improve the mine’s ore-handling infrastructure, fleet availability and use, as well as its operator and technician skills.

Holland said this build-up was under way, adding that the mine expected to reach steady-state production of between 650 000 oz and 700 000 oz of gold a year, by end 2017, making 2018 the first full year of production at these levels. 

“We are currently at half the production we need to get to, at 300 000 oz a year, so we have to more than double this over the next four years,” he said, adding that while this build-up was now expected to take 12 months longer than initially planned, the miner was confident that the desired results could be achieved.

Holland further added that South Africa had work to do in improving labour productivity, noting, however, that grassroots, primary and tertiary education also had to be addressed.

“We have to put more effort in as a country to develop skills. There are programmes in place to do that, but it takes time, so I think over time we will see the impact,” he said.