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Gold Fields Limited is one of the world’s largest unhedged producers of gold with attributable production of 3,64 million oz per annum from eight operating mines in South Africa, Ghana and Australia. A ninth mine, Cerro Corona Gold/Copper mine in Peru, commenced production in August 2008 at an initial rate of approximately 375,000 gold equivalent oz per annum. The company has total attributable ore reserves of 83 million oz and mineral resources of 251 million oz.

Review of South African Operations

South Deep Gold Mine

South Deep Gold Mine
PRODUCTION: 7,220 kg (232,100 ozs) TOTAL CASH COSTS: R169,889/kg (US$727/oz)

Overview

Location: South Deep is situated in the Magisterial Districts of Westonaria and Vanderbijlpark (Gauteng Province), some 45 km southwest of Johannesburg at latitude 26º 25’ S and longitude 27º 40’ E. It is accessed via the N12 provincial road between Westonaria and Vereeniging. A well developed network of tarred roads surrounds the area and it is located in the major gold mining region of South Africa, being the Witwatersrand Basin. Infrastructure: South Deep Gold Mine operates one gold plant and is accessed from surface through two shaft systems, the Twin shaft Complex of which the main shaft comprises a single-drop to a depth of 2,995 metres, and the South shaft Complex. The mine has been subdivided into two main areas, namely “above current infrastructure” to 110 level (2,888 metres below surface), and below current infrastructure to 135 level (3,250 metres below surface). Geology: Exploiting auriferous palaeoplacers (reefs), i.e. the Ventersdorp Contact Reef (VCR) of the Venterspost Formation and conglomerates that comprise the Upper Elsburg Reefs of the Mondeor Formation. Mine type and depth: A large developing deep level gold mine (>2,000 metres below surface). Employees in service: 4,192 permanent employees, 1,839 contractors

South Deep

            2008   2007  
Main development       km   5.9   2.9  
Main on-reef (development)       km   3.1   1.7  
(value)       g/t   6.0   6.2  
Area mined       ’000m   42.0   48.0  
Tons milled   Underground   ’000   1,066   776  
    Surface   ’000   301   328  
    Total   ’000   1,367   1,104  
Yield   Underground   g/t   6.5   6.2  
    Surface   g/t   0.8   0.9  
    Combined   g/t   5.3   4.6  
Gold produced   Underground   kg   6,967   4,783  
    Surface   kg   253   293  
    Total   kg   7,220   5,076  
    Total   ’000oz   232   163  
Operating costs   Underground   R/ton   1,170   896  
    Surface   R/ton   54   75  
    Total   R/ton   924   652  
Gold sold       kg   7,220   5,166  
Total cash costs       US$/oz   727   595  
        R/kg   169,889   137,689  
Notional cash expenditure       US$/oz   1,214   854  
        R/kg   283,712   197,636  
Net earnings       Rm   (143.1)   (46.8)  
        US$m   (19.7)   (6.5)  
Capital expenditure       Rm   784.7   283.4  
        US$m   107.9   39.4  

1South Deep for the 7 months from 1 December 2006

Safety, health and environment

Following a positive safety performance for the first three quarters a severe setback was suffered on 1 May 2008. An accident occurred in the Ventilation Raise Borehole between 100 and 110A levels when the conveyance dislodged and fell 60 metres to the bottom of the hole, resulting in the death of all nine colleagues travelling in the conveyance. The DME has commenced an investigation into the accident and an enquiry in terms of the Mines Health and Safety Act is expected to commence shortly. Gold Fields is conducting its own investigation into the accident.

Gold Fields has commissioned an external full safety review at all its operations as a result of the tragedy, which led to a deterioration in the South Deep fatal injury frequency rate for the year from 0.13 to 0.75 due to the total of 12 fatalities for the year. The serious injury frequency rate deteriorated from 4.6 to 5.2 year on year as did the overall lost time injury frequency rate, from 8.93 to 16.81. Three Section 54s were issued in the June quarter associated with three fatal incidents. Despite this, the number of injury free days continued to increase quarter on quarter with the cessation of conventional mining and the implementation of further mechanised mining.

The roll-out of the Behavioural Based Safety (BBS) programme was partially implemented before it was placed on hold pending the restructuring of the mine. The safety department was strengthened to support the roll-out of the team mobilisation process and the completion of the baseline risk assessment process. The Presidential audit took place early in April 2008.

South Deep plans to complete the implementation of OHSAS 18001 with certification by June 2009.

Operational review

South Deep is a capital project and remains a developing mine where currently most of the permanent infrastructure to support the full production remains substantially incomplete. Gold production amounted to 7,220 kilograms (231,000 ounces) during F2008 compared with production of 5,076 kilograms (163,200 ounces) in F2007.

The planned production build up could not be delivered due to the following factors which required the re-planning of the mine in February 2008: The Ventersdorp Contact Reef (VCR) encountered the Waterpan Fault above 95 level earlier than previously anticipated leading to the earlier depletion of conventional mining above 95 level. Conventional mining stopped mine-wide by February 2008. In addition, the strategy of down-dip mining below 95 level from the trackless mining projects was reviewed, and due to a lack of structural and geological information this mining method was put on hold. Subsequently the mechanised tonnage build up was stabilised at the current volumes until the below 95 level development is completed to allow mine planning to confidently position the trackless mining in the correct reef band of the Elsburg massive reef package. Since future production volumes of the Elsburg reef package remain dependent upon de-stress mining rates, the shift from conventional to mechanised de-stress mining was reviewed in order to bring forward the implementation of mechanised mining as much as possible. Lastly, the mine was re-planned with the intent to complete the Twin shaft capital infrastructure and develop the ore body below 95 level and the current mining areas.

The above changes led to the restructuring of the mine and the downsizing of the work force by 1,884 employees. The restructuring is expected to be completed by the end of August 2008.

Operating costs increased by 1 per cent driven mainly by across the board increases in input commodities as well as increased human resources costs associated with the annual wage increase and the cost of restructuring the work force.

Total cash costs were negatively affected by the safety and power related mine stoppages, increasing 23 per cent to R169,889 per kilogram for the year. The ability to mine at 90 per cent of power for the remainder of F2008 was facilitated by the change to mechanised mining methods which have significant power saving advantages over deep level conventional mining methods. Due to the gold price increase, the operating margin was similar to F2007 at 6 per cent.

Operating profit (before amortisation) was R78 million (US$11 million). Capital expenditure for the year amounted to R785 million (US$108 million) compared with R283 million (US$39 million) for F2007, with the below 95 level development project comprising the main expenditure at R296 million. This project will continue to build the basis for long life mining on the Far West Rand.

Outlook for F2009

The revised planning focuses on developing and equipping the infrastructure over a five year period with the pre-requisite significant capital investment, currently forecasted at approximately R1 billion per annum over the next six years.

For F2009 the primary focus will be on;

  • Living our vision “everyone going home safe and healthy every day”.
  • Completing the restructuring process.
  • Completing the re-support of the main access ramps in the trackless projects.
  • Completing all remedial actions for the below 95 level development to ramp up to the planned 12,000 metres development and reef metres and 5,542 kilograms of gold for the year.
  • The submission of the Mine Works Programme with the Social and Labour Plan for the conversion to the New Order Mineral Rights by December 2008.
  • The mechanisation of the de-stress mining areas by June 2009.
  • Construction of the new South Deep Tailings Storage Facility to commence by year end.
  • Capital expenditure to focus primarily on:
    • The Twin shaft infrastructure development, shaft bottom, water handling and ore hoisting capacity.
    • Phase 1;100,105 and 110 level development
    • Above 95 level O-line Development
    • Commissioning of 94 vent shaft and surface fans
    • 94 level refrigeration plant