Gold Fields uncertain of production guidance at ill-fated South Deep mine

JOHANNESBURG - Mining company Gold Fields on Thursday confirmed that this year's underperformance of the South Deep mine and the resultant knock-on impact had necessitated a further impairment of R4.8-billion, leaving the miner unable to provide guidance for 2019 and beyond.

Gold Fields, one of the world's largest gold mining firms, on Tuesday announced a restructuring at its South Deep operation which it said would result in approximately 1,560 jobs being cut. South Deep currently employs 3,614 full-time employees and 1,940 contractors.

The operation has made losses of around R4-billion over the past five years due to rising operating and overhead costs despite numerous interventions to address these. Management believes that the mine can no longer sustain these cash losses and that the cost structure needs to be realigned with the current lower level of production.

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Gold Fields said that the South Deep production guidance, factored into the group production guidance, remained unchanged from the 7,600 kg provided with first quarter results in April 2018. 

"However, given the potential volatility related to the proposed restructuring, there is an increased level of uncertainty with this forecast," Gold Fields said.

"We are unable to provide guidance for 2019 and beyond. However, for the purpose of the impairment calculation, we have used a number equivalent to extrapolating the six months ended 30 June 2018 production for 2019 of 6,100kg. As a result, South Deep has been further impaired by R4.8-billion net of tax to a carrying value of R20.7-billion."

Gold Fields said the impairment calculation may be subject to further adjustments in the future as a result of further information becoming available to management during the production planning processes.