HomeGoldGoldfields expects 20 to 25% production dip

Goldfields expects 20 to 25% production dip

Gold Fields’ South
Deep twin shafts
at dusk
Johannesburg, South Africa — MININGREVIEW.COM — 25 February, 2008 – Leading international gold producer Gold Fields Limited today forecast that its gold production for the current quarter (Q3 of its 2008 financial year) will decline by between 20% and 25% on the December quarter. This is as a direct result of the total suspension of production for one full week in January due to power constraints, continued power rationing, and the seasonal impact of the Christmas break.

In a media release updating the power situation, the company also confirmed that as a consequence of the ongoing 10% power reduction imposed by Eskom, sustainable production at its South African operations is likely to decline by between 15 and 20 percent from the June quarter (Q4 of F08) onwards, as previously advised.

Eskom has indicated that the current quota of 90% of average historic electricity consumption will remain in force for at least five years, through to 2012.

To achieve the 10% reduction in electricity consumption imposed by Eskom, Gold Fields has proposed the following actions:

  • The Number 6 and 7 shafts, as well as the 9 shaft depth extension project at Driefontein gold  mine, and the Number 3 and 8 shafts at Kloof gold mine, are to be mothballed, closed or scaled back, potentially affecting approximately 4 900 employees at these two mines;
  • South Deep gold mine is to be restructured as a result of the depletion of the Ventersdorp contact reef horizon above 95-level, and a new strategy implemented which focuses primarily on the completion of the twin-shaft infrastructure and development capital programmes. The total number of South Deep employees potentially affected is approximately 2 000;
  • Production at Beatrix Gold Mine is unlikely to be affected by the reduction in power supply;
  • The total number of employees and contractors potentially affected at all Gold Fields South African mines, therefore, is 6 900 out of a total employee population of 53 000.

The media release says engagement with all relevant stakeholders, including unions and associations, have commenced with a view to ameliorating the impact on affected employees. All alternatives will be considered to save jobs, including options such as early retirement, voluntary retrenchments, contractor replacement and redeployment elsewhere in the group.

The National Union of Mineworkers has asked management to hold back on the issue of “section 189 letters” commencing formal retrenchment discussions, until it has completed a series of meetings with Government and the Chamber of Mines, scheduled for 26, 27 and 29 February 2008.

Gold Fields Limited head of South African operations Terence Goodlace commented: “The inability of Eskom to supply the mines their full power requirements, and to commit to additional electricity demand for new mining projects currently in development, has caused a significant crisis in the South African mining industry. It is paradoxical that we have to consider downscaling in the current record-high gold price environment,” he added. “To ensure sustainability of production and the security of the associated jobs, albeit at reduced levels, all available electrical power will have to be directed to higher margin, revenue-generating shafts, at the expense of lower margin shafts and the Driefontein 9 shaft development project.”