Gold Fields to slash jobs at South Deep
INCE CONNECT / / 15 AUGUST 2018 - 04.55 / STEPHEN GUNNION
The gold producer is impairing the deep level mine by another R4.8 billion which will result in a first-half loss
Gold Fields will lay off up to 1 100 permanent employees and 460 contractors as it tries to stem losses at its South Deep mine. The gold producer says it can no longer sustain losses at South Deep, which has cost it R32 billion, including the R22 billion it paid for the mine in 2006. It now plans to start Section 189 consultations with employees.
Mines Minister Gwede Mantashe, who was informed of the latest restructuring on Monday, said Gold Fields, much like Impala Platinum, was proceeding without due regard to processes in the Mineral and Petroleum Resources Development Act. Earlier this month, Implats said it would cut 13 000 jobs in South Africa as it closed or sold five of its 11 mines to focus on profitable production.
We are beginning to notice a worrying trend where some mining companies do not meaningfully engage with the Department on their restructuring plans, and only brief us as a mere formality or tick-box exercise, ignoring processes outlined in the law which are binding to every mining right-holder,"Mantashe said."so it stands out better."
Gold Fields said mechanising South Deep had faced persistent issues and the mine faced rising operating and overhead costs and had consistently failed to meet mining and production targets. It said the operation was staffed and resourced for a much higher production rate than was being achieved and overall labour productivity was significantly below the industry average. Despite numerous interventions, the mine had lost R4 billion over the past five years.
It completed phase 2 of an organisational restructuring plan in the first quarter of the year which included mostly voluntary retrenchments. This had led to a negative impact on morale and even worse levels of productivity.
South Deep needs to be operated and scheduled as a safe, deep-level, capital-intensive, but highly mechanised and efficient operation," Gold Fields said. "This will require a reduction in fleet and the associated labour complement as well as an improvement in effectiveness and productivity to build sufficient margin in the business to carry the high fixed cost base and deliver sustainable profitability."
Gold Fields said South Deep's underperformance this year had necessitated a further impairment of the asset. It's writing down its value by another R4.8 billion, net of tax, to a carrying value of R20.7 billion. The company said combined with a $96 million charge in Ghana, it would report a basic loss per share of $0.45 for the six months to end-June, down from earnings of $0.07 last year.
Headline earnings per share are expected to be unchanged at $0.08 and normalised earnings are likely to fall by 44% to $0.05.
Its shares sank 14% to R41.84 yesterday.
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