Mining Weekly

Getting the best out of South Africa’s mining sector starts with policy certainty, said Gold Fields CEO Nick Holland last month.

Following the Johannesburg- and New York-listed company’s presentation of outstanding half-year results, in spite of Covid, Holland said this in response to Engineering News & Mining Weekly on the issue of South Africa’s shrunken gold mining sector and the steps that need to be taken to regrow it.

“We’ve heard that the appeal to the once-empowered-always-empowered case has been removed. Hopefully, that’s positive. But, at the same time, there is still this overhanging issue on the new Charter, which proposes that renewals and replacements are not covered, and I think companies are worried about that, and about having to go and redo deals they’ve done in good faith. So, I think we need to sort that out,” said Holland, who will be retiring in 2021.

Technology was another factor that could generate growth: “But the one thing we’re learning about technology is that it’s an incremental process. It takes time. We’re limited by what’s still so available out there. What technology is available? Do we have hydrogen-operated trucks at this stage that can operate up and down ramps? We don’t. We do have prototypes that have the makings of it but there’s more work that needs to be done to get them fit for purpose.

“The third issue is that there is a short- to medium-term opportunity in that, if you look at the high gold prices, there’s potential for the resources to convert to reserves here in the gold industry and, given that some of the orebodies extend out, that could provide an opportunity to at least keep the mines going for longer. So, I think we should grab that one, if that’s real. So, there is stuff we can do,” said Holland.

Gold Fields did so well in the half-year to June 30 that its R1.60-per-share interim dividend already matches that for the full year of 2019.

A Lot of Gold at Depth

“There’s a lot of gold at depth, but you know mining 5 km down is not for sissies. You’re talking about exponential seismicity, exponential virgin rock temperatures, massive cost to get there, and I don’t think you want to be sending people down there. So, if you can get to remote mining, the possibilities certainly exist for the future,” he said.

Gold Price More than One-Million Rand per Kilogram

“We will see that high profits and high cash flows will feed into more taxes into the centre, which is good. I think also we’ll see more jobs being preserved, not necessarily new jobs being created, but preserving a job is like creating a job, I think, and then also more money that can go into communities around us. So, yes, a million rand a kilogram should be good in the long run,” he added.

“If you’re underweight gold, it’s not too late – there’s still a bit of gold on the table. We logged the stock market against gold and that showed that gold has performed and will continue to perform.

South Deep Shaping Up

First-half gold production at South Deep increased by 10% to 3 123 kg (100 400 oz) and all-in cost decreased by 6% to R654 537/kg ($1 234/oz) from R698 982/kg ($1 529/oz), driven by higher gold sold and lower capital expenditure. Despite the impacts of the Covid-19 lockdown, South Deep generated a net cash inflow of R79-million for the six months ended June 30, compared with an outflow of R238-million in the corresponding period of 2019.

“I was going to use the phrase ‘every dog has it’s day’, but maybe that’s inappropriate for some people. I suppose for some people, they feel it’s been a dog. I must just give tremendous credit to the team we put in place there. They have worked through all the issues carefully, in a sustainable fashion, starting with getting the organised labour relationship right.

“We went through that restructuring, which took us six months to do. We’ve returned to profitability. We’re seeing better execution of the mine planning each and every day. So, slowly but surely, we’re seeing improvements, and to have a million rand a kilogram on top of that, we don’t have to become rock stars to make a lot of money here.

“If we only got production up another 20% or so, we’d still be making substantial money. I think we can do a lot better than that over the next three or four years. I’m feeling a lot more encouraged. I think you can sense my optimism for the first time in a long time, and I think it’s warranted,” said Holland in the interview with Engineering News & Mining Weekly.