Electricity Crisis Puts 6,900 Gold Fields Jobs at Risk and Further Effect on Production
February 25 2008 - 2:19AM
PR Newswire (US)
Teleconference JOHANNESBURG, South Africa, February 25
/PRNewswire-FirstCall/ -- Gold Fields will host a teleconference on
Monday, February 25, at 16:30 Johannesburg time, to discuss the
impact of the power rationing on its South African Operations. The
details of the teleconference appears at the bottom of this press
release. Gold Fields Limited gold production for the current
quarter (Q3 F08) is forecast to decline by between 20% and 25%
against the December quarter (Q2 F08), as a result of the total
suspension of production for one full week due to power
constraints, continued power rationing, and the seasonal impact of
the Christmas break. It is further confirmed that, as a consequence
of the 10% power reduction imposed by Eskom, sustainable production
at Gold Fields' South African operations is likely to decline by
between 15 and 20 percent from the June quarter (Q4 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 the following
actions are proposed: - The Number 6 and 7 shafts as well as the 9
shaft Depth Extension Project at Driefontein, 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. This too is unfortunately compounded by the
power rationing. 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 of Gold Fields' South African mines is
6,900 out of a total employee population of 53,000. 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 however asked
management to hold back on the issue of "section 189 letters"
commencing formal retrenchment discussions, until the Union had
completed a series of meetings with Government and the Chamber of
Mines, scheduled for 26, 27 and 29 February 2008. Terence Goodlace,
Head of South African Operations for Gold Fields Limited, said:
"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. 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." The above proposals were determined only
after extensive and thorough review, including the following: - In
order to optimise the use of available electricity, and to
ameliorate the impact on production, a number of electricity
savings and optimisation projects are at various stages of
implementation on all mines. All non-essential electricity use has
been stopped; - Gold Fields operations have implemented a number of
demand-side management projects, diverting approximately 50 MW of
electricity consumption to off-peak periods. Projects to divert a
further 100 MW is currently in progress or awaiting approval from
Eskom; - All operational plans and capital projects have been
restated within the constraints of available electricity, and to
divert available electricity to higher margin areas at the expense
of lower margin areas and non-essential capital projects. Gold
Fields is currently controlling its average power usage to 540 MW,
down from the historical average of 601 MW. To provide some
safeguard against future electricity cut-backs from the current 90%
level, a number of opportunities for self-generation of electricity
at the different mines are currently undergoing feasibility
studies. Gold Fields is to spend some R200 million on additional
emergency power to safeguard employees in the case of a total
blackout. The health and safety of our employees remains our top
priority. This programme is to be completed by calendar year end.
Operational Guidance Driefontein Gold Mine: Nos. 6, 7 and 9 Shafts
At Driefontein it is proposed that a) Driefontein 6 shaft be placed
in a phased closure with only cleaning and reclamation activities
taking place until final closure by December 2008, and b)
Driefontein 7 shaft be mothballed with immediate effect. It is also
proposed that the Driefontein 9 Shaft Depth Extension Project be
suspended and deferred and the electrical power currently being
utilised at 9 shaft will be re-directed to the number 3 plant. The
9 shaft project is a life extension project and includes shaft
sinking; the construction of a sub vertical shaft complex; and the
completion of infrastructure required to access 8.5 million ounces
of gold reserves from depths of 3,500 metres to 4,120 metres below
surface. This project would extend the life of the Driefontein Gold
Mine from approximately 2025 to 2035. The suspension of the 9 shaft
project ensures that Gold Fields can fund the capital programme at
South Deep. Specialist shaft sinking contractors were awarded the
mining contract to develop the Depth Extension project and 930
people currently employed on the project would be affected by the
suspension of work on the project. Capital expenditure of
approximately R 5.4 billion over the next ten years was planned on
the development of this project. This new mine would require an
energy demand of approximately 110 MW and a guarantee from Eskom of
their ability to supply this future energy to meet the planned
production requirements. In the March 2008 quarter production from
Driefontein Gold Mine is expected to decline by 1,500kg to
approximately 5,900kg and total cash costs is likely to increase
from R94,390/kg to R116,250/kg. The bulk of this impact is
attributable to the week long power shut down during the quarter,
followed by lower production with the constraint of only 90% of
power, with some contribution from the seasonal decline due to the
Christmas break. Steady state sustainable production from the June
2008 quarter and onwards should decline by approximately 608kg to
approximately 6,800kg per quarter at cash costs of approximately
R102,150/kg compared to the December 2007 quarter. In total
approximately 2,600 of Driefontein's 18,500 employees (including
contractors) may be affected. Kloof Gold Mine: Nos.3 and 8 Shafts
At Kloof it is proposed that Kloof 8 shaft be mothballed and
production terminated with a loss of approximately 300 kg of gold
per quarter. Pumping infrastructure in the shaft would be
maintained. Kloof 3 shaft would be scaled back and production
reduced by approximately 510 kg per quarter to 840 kg per quarter.
In the March 2008 quarter production from Kloof Gold Mine is likely
to decline by 1,700kg to 5,450kg and total cash costs is likely to
increase from R91,029/kg to R115,200/kg. The bulk of this impact is
attributable to the week long power shut down during the quarter,
followed by lower production with the constraint of only 90% of
power with some contribution from the seasonal decline due to the
Christmas break. Steady state sustainable production from the June
2008 Quarter and onwards should decline by approximately 1,270kg to
approximately 5,910kg per quarter at cash costs of approximately
R104,061/kg compared to the December 2007 Quarter. The mine has
formally requested an additional 8MW from Eskom due to difficulties
experienced in re-establishing safe production levels. Additional
electricity is required to operate a recently commissioned
refrigeration plant, a recently commissioned underground booster
fan, and pumping requirements. In total approximately 2,300 of
Kloof's 17,200 employees (including contractors) may be affected.
South Deep Gold Mine Since acquiring South Deep in January 2007 the
mine has not achieved the planned increased ore production as
proposed in the feasibility study compiled by the previous joint
venture owners (the Joint Venture Feasibility Study). The mine has
produced on average 108,000 tons per month of ore from underground,
which is 71% of planned production, whilst incurring 105% of the
full planned production costs. A full strategic review of the
existing mine plan has concluded that the current installed shaft
infrastructure will not support the feasibility scope of mining
activity which includes ore reserve development and the build-up of
production to the envisaged 330,000 tonnes of ore per month. The
South Deep Twin Shaft infrastructure is still under construction
and has inadequate installed refrigeration, ventilation, water
pumping and ore handling facilities. The inability to reach
previously planned levels of production has been compounded by
recent structural geological changes, specifically in the
conventional mining areas of the Ventersdorp Contact Reef (VCR).
The conventional mining of the Ventersdorp Contact Reef (VCR) above
95-level intersected the Waterpan fault some 12 months earlier than
predicted and this loss of mining face, in addition to the stopping
of the two other VCR mining areas, which encountered poor ground
and unsafe conditions, has resulted in no conventionally mineable
areas being available to mine. As a consequence, all conventional
VCR mining has been stopped. To ensure that South Deep is optimally
developed for the long-term benefit of all stakeholders, and to
correct the constraints imposed by the incomplete shaft
infrastructure and inadequate ore reserve development on the future
viability of the mine, it is proposed to restructure the mine to
address these constraints. The delivery of the capital
infrastructure and the development of the ore body have to be the
primary focus for the next 18 months. During this period ore
production will be constrained to between 80,000 and 100,000 tons
per month (200,000 ounces of gold annualised) from only the
mechanised trackless sections of the mine and, to a lesser extent,
from the mechanised mining of the "de-stress cut". The proposed
restructuring is likely to affect 2,000 of the 6,000 people
(including contractors) employed at the South Deep Gold Mine.
Earlier indications were that it may have been possible to redeploy
up to 1,530 of the affected South Deep employees to other
operations in the Gold Fields Group. However, the imposition of the
power rationing to 90%, and the affect that this is having on
employment levels at, in particular Driefontein and Kloof,
mitigates against this as an option. The national power crisis
would have required South Deep, at 90% of average power usage, to
have reduced from 66MW to 59MW. South Deep could not have sustained
the conventional mining section in the VCR at 59MW. It is likely
that this area would have been stopped on the basis of inadequate
power, had the structural geological change not intervened. In the
March 2008 Quarter production from South Deep Gold Mine is likely
to decline by 700kg to approximately 1,400kg and total cash costs
is expected to increase from R147,719/kg to R237,200/kg. The bulk
of this impact is attributable to the week long power shut down
during the quarter, followed by lower production with the
constraint of only 90% of power with some contribution from the
seasonal decline due to the Christmas break. In addition the mine
is still fully staffed for the now depleted conventional VCR mining
section. The production for the June 2008 quarter should decline by
860kg to approximately 1,200kg at cash costs of approximately
R250,000/kg compared to the December 2007 quarter. Once
restructuring is completed it is planned to operate the mine at
unit costs of R160,000/kg with production at between 1,400kg and
1,500kg a quarter. Capital spend is planned at R1 billion for
F2009. Beatrix Gold Mine Production at Beatrix Gold Mine will be
unaffected by the electricity rationing as it is in a position to
absorb the 10% reduction in electricity through a number of power
savings and generation projects presently being implemented. This
mine is less energy intensive than the deeper Driefontein and Kloof
operations. In the March 2008 Quarter, production from Beatrix Gold
Mine is expected to decline by 1,004kg to approximately 2,644kg and
total cash costs may increase from R108,058/kg to R150,908/kg. The
bulk of this impact is attributable to the week long power shut
down during the quarter, followed by lower production with the
constraint of only 90% of power with some contribution from the
seasonal decline due to the Christmas break. Steady state
sustainable production from the June 2008 quarter and onwards
should increase by 35kg to approximately 3,733kg per quarter at
cash costs of approximately R108,210/kg compared to the December
2007 Quarter. The forecast information has not been reviewed and
reported on by the Gold Fields auditors. About Gold Fields Gold
Fields Limited is one of the world's largest unhedged producers of
gold with attributable production of more than four million ounces
per annum from eight operating mines in South Africa, Ghana and
Australia. A ninth mine, the Cerro Corona Gold/Copper mine in Peru,
is expected to commence production by mid 2008 at an initial rate
of approximately 400,000 gold equivalent ounces per annum. The
company has total attributable ore reserves of 92 million ounces
and mineral resources of 252 million ounces. Gold Fields employs
some 53,000 permanent employees across its operations and is listed
on the JSE Limited South Africa (primary listing), the New York
Stock Exchange (NYSE) and the Dubai International Financial
Exchange (DIFX). All of Gold Fields' operations are ISO14001
certified. For more information please visit the Gold Fields
website at http://www.goldfields.co.za/. Teleconference Monday
February 25, 2008 For Johannesburg: 16:30 For United Kingdom: 14:30
hours GMT For Europe: 15:30 hours, European time For North America:
09:30 a.m., Eastern time Gold Fields Limited will be hosting a
teleconference to discuss the impact of the power rationing on its
South African operations on Monday, February 25 at the times listed
above. A set of slides for the teleconference will be available on
the Gold Fields website http://www.goldfields.co.za/, two hours
before the start of the teleconference. Dial in Numbers South
Africa Toll: 011-535-3600 Toll-free: 0800-200-648 USA Toll:
1-412-858-4600 Toll-free: 1-800-860-2442 Australia Toll-free:
1-800-350-100 United Kingdom Toll-free: 0800-917-7042 Canada
Toll-free: 1-866-519-5086 Europe and other Toll: +41-916-105-600
Toll-free +800-246-78-700 Ask for Gold Fields call Simultaneous
Audio Webcast Available at our website,
http://www.goldfields.co.za/ Digital Replay Available One-Hour
After Call Playback code: 2541 (Available for seven days) South
Africa & Other: +27-11-305-2030 USA: 1-412-317-0088 United
Kingdom: 0808-234-6771 Europe: +41-91-612-4330 (Switzerland)
Australia: 1-800-091-250 Enquiries re teleconference: Francie
Whitley, Phone: +27-11-644-2505, Fax: +27-11-484-0639, . Enquiries:
Reidwaan Wookay, Tel: +27(0)11-644-2665, Mobile: +27(0)84-878-4566;
Andrew Davidson, Tel: +27(0)11-644-2638, Mobile: +27(0)82-667-7203.
DATASOURCE: Gold Fields Limited CONTACT: Enquiries: Reidwaan
Wookay, Tel: +27(0)11-644-2665, Mobile: +27(0)84-878-4566; Andrew
Davidson, Tel: +27(0)11-644-2638, Mobile: +27(0)82-667-7203.
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