Gold Fields Ltd. stopped most production at its South Deep mine in South Africa after two deaths in a fortnight, the latest blow to the 24-year development of the world’s second-biggest gold deposit.
The Department of Mineral Resources ordered the stoppage while the company reassesses how it operates its underground workshops, where one of the accidents occurred, Gold Fields said in a statement today. The company will hold a four-month safety review. South Deep will lose 64,300 ounces of gold production, 16 percent of the mine’s total for 2013.
Gold Fields has said South Deep is its “most important value driver,” yet it has been beset by delays and safety problems since its inception in 1990. The Johannesburg-based company, which bought the mine for $3 billion in 2006, hired a team of 15 Australian experts earlier this year to better mechanize the operation and train employees.
“A safe working environment on all of our mines is our first priority,” Chief Executive Officer Nick Holland said in the statement. “We are now paying the price for the skills deficit at South Deep, which contributed to this outcome.”
Gold Fields targets 650,000 ounces to 700,000 ounces of production from the mine by 2017, two years behind its initial schedule. That goal shouldn’t be affected by the stoppage, the company said.
“We cannot at this point in time guarantee that there will not be other issues identified by the new management team, which may further impact guidance for the year,” Holland said.
The stock fell 3.9 percent to 36.57 rand by 1:46 p.m. in Johannesburg trading, the lowest intraday price for fourth months. It’s down 60 percent since the start of last year.
Gold Fields has spent about $1 billion developing South Deep in addition to the purchase price. Nine employees died at the mine when a cage lift cable snapped in May 2008. A worker died in a fall of ground incident in April that year.
Once ramped up to full production, South Deep will be South Africa’s biggest gold mine, producing 700,000 ounces a year until at least 2075 at a cost of less than $1,000 an ounce. Only the Grasberg deposit in Indonesia contains more gold.
The disruption won’t affect Gold Fields’ full-year production target of 2.2 million ounces from all its operations this year, the company said.
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