World’s most pricey long drop just keeps on sucking cash

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THE BOTTOM LINE

World’s most pricey long drop just keeps on sucking cash

News that 1,560 people face the sack at South Deep mine just adds to the woes that Gold Fields faces

Allan Seccombe

The glowing views of South Deep early this decade from people at the upper echelons of Gold Fields didn’t give a single hint about the difficulties that were to follow.
South Deep, the R32bn gold mine in Gold Fields, has never come close to realising the potential that management envisioned for the asset when they bought it in 2006.
The mine had already had a rocky start with Western Areas under the leadership of the infamous Brett Kebble and the spats it had with Canadian partners in building the mine.At the official opening of the mine, Kebble, who perpetrated one of the worst frauds in SA’s mining history, called the mine with its 3km deep shaft the “world’s most expensive long drop”.
Investors in Gold Fields must feel the same way. There has been precious little to show for the R22bn purchase price and the R10bn subsequently invested in the mine.
The early vision was for South Deep to produce up to 800,000oz of gold a year from one of the world’s largest untouched ore bodies in a grand mechanised mine moving millions of tonnes of ore each year with a relatively small and highly skilled workforce.
Last year, after a number of downward revisions and misses on targets, management settled on 480,000oz by 2022 and an investment of another R2bn.
On Tuesday, that target was abandoned, and the workforce faces being cut by 1,560 people. There is no end in sight for this mine which CEO Nick Holland keeps telling the market the company understands and has a measure of the problems besetting it. The question now is surely how much longer shareholders will tolerate this increasingly heavy albatross around the company’s neck.

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