Gold Fields faces restructuring after losses and impairment charge

Gold Fields (NYSE: GFI) has posted an impairment charge of US$359 million in the first half of the year at its troubled South Deep mine in South Africa, which has recorded losses of US$284 million over the last five years.

Production at the mine west of Johannesburg fell by 19% year-on-year to 97,000 ounces of gold in the six months ended June 30, and the company says its latest restructuring plan could result in lay-offs of about 1,100 permanent employees.

The mine, which extends about 3 km below surface, has had a number of operational challenges since Gold Fields acquired it in 2006.

“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, mechanized mining approach,” the company states in a press release announcing its first-half results. “South Deep is a complex and unique mine that has faced persistent issues that need to be addressed in a holistic manner.”

Gold Fields noted that the mine continues to make losses despite “numerous interventions” including “optimizing the mining method, extensive training and skills development, changing shift and work configurations, and outsourcing functions.”

In previous restructuring efforts and voluntary retrenchment programs, 47 employees at the more senior management level left South Deep during the fourth quarter of 2017, followed by 261 lower-ranking employees in the first quarter of 2018.

The company reported attributable gold-equivalent production from continuing operations in the first half of the year of 994,000 ounces, down from 1.02 million ounces in the first six months of 2017.

Gold Fields recorded a loss of US$367 million (US45¢ per share), compared with a profit of US$54 million (US7¢ per share) a year earlier.

Normalised profit from continuing operations reached US$43 million in the six months ended June 30, compared with US$78 million in the year-earlier period.