August 14, 2018 / 7:15 AM / a year ago

UPDATE 2-South Africa's Gold Fields plans to cut jobs in mine restructuring

* Gold Fields to cut 1,100 jobs in mine restructuring

* South Deep lost 4 billion ($284 mln) rand over five years

* Shares down more than 12 pct (Adds CEO, mines minister, union comment, details)

By Tanisha Heiberg

JOHANNESBURG, Aug 14 (Reuters) - South Africa’s Gold Fields said on Tuesday it plans to cut costs and 1,100 jobs at its struggling South Deep mine, sending its shares down more than 12 percent.

South Deep, the company’s last South African asset, which has lost 4 billion rand ($284 million) over the past five years, has faced operational obstacles in a tough geological setting 3 km (2 miles) below the surface.

“The key challenge has been the difficulty in transitioning the mine from one run with a conventional mining mindset and practices to mining with a modern, bulk, mechanised mining approach,” Gold Fields said in a trading update.

Shares in Gold Fields fell 12.61 percent to 42.43 rand by 1030 GMT, after it said it could cut around 30 percent of the mine’s permanent workforce and around 460 contractors.

“The mine is losing around 100 million rand a month in cash. We need to take steps to stop the cash negative impact,” said Chief Executive Nick Holland during a conference call.

This is the latest planned lay-offs in the mining industry, which has battled depressed prices, policy uncertainty, soaring costs and social unrest.

Impala Platinum said earlier this month it planned to cut its workforce by a third over two years, while Sibanye-Stillwater expects to cut 12,600 jobs over three years as part of its plan to acquire Lonmin.

Unemployment in Africa’s most industrialised economy stands at more than 27 percent and job cuts are a hot political issue ahead of national elections next year.

Mineral Resources Minister Gwede Mantashe expressed concern over the planned job cuts at Gold Fields, and also criticised some mining companies of not meaningfully engaging with the department on their restructuring plans but “only brief us as a mere formality or tick-box exercise.”

The National Union of Mineworkers (NUM), the biggest union at Gold Fields, criticised the trend of retrenchments and appealed to the mines ministry to intervene.

“We feel that this is a bloodbath of job losses in the industry, mine workers have become the sacrificial lamb in the name of profit,” NUM spokesman Livhuwani Mammburu said.


Gold Fields, which has invested 32 billion rand in the South Deep operation since acquiring it in 2006, said the mine missed several output targets and could not estimate future bullion production.

“We have removed all long-term targets off the table for now given the uncertainty of the restructuring,” Holland said.

Gold Fields, which previously set a production target of 500,000 ounces to be reached by 2022 at the mine, said it would provide guidance for 2019 and beyond once the full impact of the restructuring is completed.

The firm also plans to reduce capital expenditure for the next 18 months and redeploy workers to other parts of the mine.

Although South Deep made a loss of 337.6 million rand in 2017, Holland was still confident the mine holds value.

“We believe there is more in it for the shareholders by continuing at this stage than not continuing and actually throwing away all the money we spent,” said Holland.

Gold Fields said it expects headline earnings per share for the six months ended June 30, 2018 to be unchanged at $0.08 per share compared with the previous reporting period. ($1 = 14.0819 rand) (Editing by James Macharia and David Evans)

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