GFI 201702160004A
South Deep Rebase Plan
Gold Fields Limited
Reg. No. 1968/004880/06)
Incorporated in the Republic of South Africa)
Share Code: GFI
ISIN Code: ZAE000018123
MEDIA RELEASE – S o u t h D e e p R e b a s e P l a n
Johannesburg, 16 February 2017: Gold Fields Limited (Gold Fields) (JSE,
NYSE: GFI) is pleased to announce the results of the South Deep Rebase Plan.
The mine entered a critical stage of its evolution at the beginning of 2015
when Gold Fields made the decision to take a step back and fix the base at
the mine before determining the new long-term steady state profile.
As part of this process, we removed the previous production and cost targets
to afford the new South Deep management team the time to get the basics
right and determine the way forward. However, in the absence of long-term
production targets, we stated that it was our goal to get the mine to cash
breakeven by the end of 2016, a goal that we are pleased to have achieved.
For FY 2016, South Deep generated net cash flow of US$12m. Even after
stripping out the benefit of the rand hedge, the mine achieved cash
breakeven for the year.
In addition, we undertook to provide a new ramp-up plan for the mine, which
we are pleased to announce today. The mine is expected to ramp-up to steady
state production of c.500koz over the next 5 years at AIC below US$900/oz
(in 2017 money terms).
The new management team undertook a thorough diagnostic during 2015, which
resulted in 68 business improvement projects being identified to create a
long-life, sustainable mechanised mine. To-date, 29 projects have been
completed, with 27 expected to be closed out in 2017 and the remaining 12
expected to be completed in 2018.
South Deep has faced a number of challenges over the years which can best be
summarised into four broad categories: People and skills; Fleet and
maintenance; Underground working conditions; and Mining method. Whilst we
have made good progress on all categories over the past two years, continued
improvement is required and anticipated during the ramp-up to steady state:
- People and skills: The first priority was to establish an experienced
management team with extensive exposure to mechanised and deep level
mining. This objective was successfully achieved with most of the new
management team now in place for 18 months or more and with a low
turnover rate. A further 168 critical skill positions requiring
experienced and skilled staff were identified at the start of 2015.
Most of these positions were filled by the end of 2016 with only a
limited number of specialist skill positions yet to be filled. In
addition to acquiring the necessary skills at the senior and middle
management level, the development of mechanised mining skills was
highlighted as a specific and critical requirement for the future
success of the mine. As such, a mechanised mining skills development
programme focusing on supervisors, artisans and operators was
implemented and sound progress recorded.
- Fleet and maintenance: South Deep instituted a number of key
strategies to upgrade the condition of mechanised equipment fleet and
effectiveness of its maintenance practices. As part of the fleet
renewal strategy, 58 category 1 units have been commissioned over the
past 2 years. The total category 1 fleet currently stands at 111. An
expansive and fully equipped underground workshop spanning a total
footprint of 200 metres x 200 metres was commissioned on 93 level to
provide the working conditions necessary for maintenance personnel to
perform their tasks more effectively. Maintenance skills development
programmes were introduced to upskill our engineering personnel. In
addition, outsourced OEM maintenance contracts were concluded with key
suppliers (Sandvik and AARD) to effect immediate improvements as our
own skills improve over time.
- Underground working conditions: The new management team identified
poor underground working conditions as a key impediment to turning
South Deep into a successful mechanised mine. A number of business
improvement projects were initiated to remediate this deficiency and
focused on various elements of the underground infrastructure,
including roadways, water management, backfill and ventilation.
- Mining method: As an ultra-deep bulk mine, geotechnical considerations
and mine design are critical elements in the overall successful
extraction of the orebody. To this end several improvements in the
overall design and mining layouts have been implemented during the
past two years.
- Regional Pillars: The overall stiffness of the regional support
design was improved by reducing the corridor span between regional
pillars from 240 metres to 180 metres and by increasing the
dimensions of crush pillars in the destress cuts from 10 metres x 6
metres to 8 metres x 20 metres. Regional pillar width has remained
at 60 metres. The design improvements resulted in lower excavation
convergence rates and an increase in overall rockmass stability.
- High Profile Destress: Over the past two years South Deep converted
from a low profile (2.2 metre) destress mining method to a high
profile (5.5 metre) layout. This has eliminated an inefficient and
cumbersome multi-step mining process, which included footwall or
hangwall ripping to open excavations for longhole stoping
equipment, and enabled mechanised roofbolt installation. In a
significant step for the mine, low profile was completely phased
out in mid-2016. Going forward, all destress development will
employ the high profile method.
Significant improvements in 2016
The initiatives that were implemented over the past two years started to
yield results during 2016, which was a milestone year for South Deep.
Apart from the 47% increase in gold production to 9.0t (290koz) there was
a continuous improvement in the lead indicators (which we have been
providing the market with for the past two years):
- Development increased by 47% to 6,933 metres in 2016 from 4,701 metres
in 2015. New mine development increased by 9% YoY to 811 metres.
- Given the change to the high profile method in the middle of 2015,
destress mining was little changed YoY at 32,333 square metres
(FY2015: 31,499 square metres). The high profile method accounted for
69% of total destress mining in 2016 compared to 5% in 2015. All
destress mining on the mine now uses the high profile method.
- Longhole stoping volumes increased by 74% to 745kt in FY2016 (FY2015:
429kt). There was a notable improvement in longhole stoping rig
productivity during FY2016, which increased by 28% YoY to 9,805t/rig.
- Secondary support installation increased by 32% YoY in FY2016 to 8,694
metres.
- Backfill placed was 10% higher YoY at 373 cubic metres
Five-year outlook to steady state
It is anticipated that South Deep will reach steady state production in
2021/2022. During this six year period, tonnes mined will ramp up at a
fairly consistent rate from the current 160 ktpm run rate to 230 ktpm when
at steady state. A big driver of the volume growth to steady state is the
increased contribution from longhole stoping.
The table below illustrates the key production, cost and capital metrics
associated with the ramp-up plan. Importantly the ramp-up does not assume
significant productivity improvements over five years, but those which
have been achieved in 2016.
Descriptio
n Unit 2017 2018 2019 2020 2021 2022
Tonnes
milled kt 1 960 2 685 2 550 2 518 2 691 2 815
Recovered
grade g/t 5.3 5.3 5.3 5.4 5.7 5.5
Production kg 9 800 11 136 12 224 13 698 15 385 15 454
koz 315 358 393 440 495 497
Sustaining
capex Rm 1 004 1 135 1 370 1 237 1 289 1 066
Growth
capex Rm 287 424 582 353 274 253
585 567 551 469 417 402
AIC* R/kg 129 910 004 273 647 273
US$/o
AIC* z 1 277 1 239 1 194 1 014 905 872
*In 2017 money terms
The production ramp-up over the next six years occurs in the North of
Wrench mining area, which is a lower extension to the current mining
operations and contains reserves of 10.7Moz. North of Wrench expands into
six corridors with independent operating and ventilation systems. As such,
ventilation and refrigeration are important factors to achieve the planned
production build-up. Consequently, a substantial increase in refrigeration
and upgrading of ventilation infrastructure and equipment is required in
order to meet the ramp-up profile. Most the additional requirements occur
over the next three years.
Total growth capital of R2,280m will be spent over the next six years,
peaking at R582m in 2019. The bulk of this capital is required for
underground infrastructure (R1,044m) and follow-on development (R724m),
with the remainder budgeted for electricity (R104m), verticle development
(R88m), fleet (R66m) and drilling (R58m). Most of these items were part of
original project capital that was deferred in 2013 (R1.2bn in 2009 money
terms).
Importantly, most of the operating expenditure is now in the cost base,
with the majority of the key skills and fleet now in place. As the mine
ramps up to steady state, we expect to see operational gearing given the
fixed cost nature of the mine. As a result, we expect steady state AIC
below US$900/oz.
ends
Enquiries
Investors
Avishkar Nagaser
Tel: +27 11 562-9775
Mobile: +27 82 312 8692
Email : Avishkar.Nagaser@goldfields.com
Thomas Mengel
Tel: +27 11 562 9849
Mobile: +27 72 493 5170
Email: Thomas.Mengel@goldfields.com
Media
Sven Lunsche
Tel: +27 11 562-9763
Mobile: +27 83 260 9279
Email : Sven.Lunsche@goldfields.com
Notes to editors
About Gold Fields
Gold Fields Limited is an unhedged, globally diversified producer of gold
with eight operating mines in Australia, Ghana, Peru and South Africa with
attributable annual gold production of approximately 2.0 million ounces. It
has attributable Mineral Reserves of around 46 million ounces and Mineral
Resources of around 102 million ounces. Attributable copper Mineral Reserves
total 532 million pounds and Mineral Resources 5,912 million pounds. Gold
Fields has a primary listing on the JSE Limited, with secondary listings on
the New York Stock Exchange (NYSE) and the Swiss Exchange (SWX).
Sponsor: J.P. Morgan Equities South Africa (Pty) Ltd
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