Gold Fields is investing $1.1bn into 2024 capex as South Deep ramps up output

Gold Fields' South Deep mine. File photo

Gold Fields' South Deep mine. File photo

Published Feb 23, 2024


Gold Fields is investing at least $1.1 billion (R21bn) in capital expenditure this year as it spends more on infrastructure upgrades and fleet replacements at its South Africa operation, South Deep.

South Deep will ramp up output over the next two years as well as into planned development at the St Ives mine in Australia.

In the year to the end of December 2023, Gold Fields reported yesterday that attributable profit amounted to $703.3 million, or $0.79 per share, compared with a profit of $711m, or $0.80, in the previous contrasting period.

However, Gold Fields paid a final dividend of R4.20 per share for the period, taking the total payout for the full year to R7.45 per share.

Of the $1.1bn capex planned for this year, Gold Fields, which has expanded into Ghana, Australia, Peru and elsewhere, will likely spend up to $890m on sustaining capital compared with $692m last year.

This will see Gold Fields invest into “mine infrastructure upgrades and fleet replacement” at the South Deep asset in South Africa.

After producing 2.244 million ounces in 2023, Gold Fields expects to lift up production this year by 20% over the next two years. This will be attained through ramping up output from the Salares Norte mine in Chile, while South Deep will also build up its production to 380 000 ounces per year.

Gold Fields CEO Mike Fraser said: “This incremental production comes with very competitive all-in costs and will improve the overall quality of the portfolio and enhance the cash generation of the business.”

Non-sustaining capex will take up about $300m of the capital spend for this year, with the largest component of this being project capital investments for the Salares Norte mine as well as into the Windfall Project.

Fraser, who took over from Chris Griffith at the beginning of this year, said the South Deep operation in South Africa had a “tough start to the year” with two fall of ground incidents impacting production in the first quarter of the period.

“This was compounded by a shortage of key skills, particularly operators and artisans for the long-hole stopping drill rigs. These challenges led to a decrease in guidance,” he said.

Consequently, gold production from South Deep for year to December 2023 dipped 2% to 10.02 kilograms, with total all-in cost increasing by 12% to R800 097 per kilogram. This has been attributed to the “higher cost of sales before amortisation and depreciation and lower gold sold, partially offset by lower capital” expenditure.

Positively though, from a labour perspective Gold Fields has just concluded a two-year extension to its three-year wage agreement with unions, helping it secure certainty and sustainability for its South African operations.

“This agreement seeks to balance the interest of the company and employees and brings much-needed certainty and stability to the operation until 2026,” said Fraser.

In Australia, Gold Fields surpassed 1 million ounces in output, although production was broadly in line with prior year levels against the backdrop of a 14% increase in all-in costs which soared to $1 253 per ounce during the year under review, mainly driven by mining-related inflation.

The Australia region generated adjusted free cash flow of $48m for Gold Fields, a 13% improvement on the prior year.

“The tight labour market in Western Australia impacted the ability to attract and retain skilled mining operators, maintenance workers and supervisors at Gruyere, particularly to support the planned increased production profile,” the company said.

Gold Fields’ Tarkwa mine in Ghana is the group’s largest and is seen continuing to deliver up to 480 000 ounces per year over the next 10 years.

Moreover, Gold Fields’ production profile could be boosted by finalisation of the Tarkwa/Iduapriem joint venture which is currently awaiting the approvals from the government of Ghana. The joint venture will leverage on operating efficiencies to unlock higher gold grades and enable an extension of life to at least 18 years.

“The combined mine (on 100% basis) will deliver estimated annual production of approximately 900 000 ounces over the first five years and approximately 600 000 ounces per annum for the remaining life of the operation.”