South Deep Mine Set To Retrench 1100 Employees

The mining sector continues to shed jobs at an alarming rate with the latest announcement from JSE-listed gold producer, Gold Fields indicating its restructuring process at its South Deep operation, expected to see 1100 permanent employees laid off.

It is envisaged that around 30.4% of the 3,614 permanent employees could potentially be impacted by the proposed restructuring. Furthermore, an approximate addition of 460 of the 1,940 contractors could also potentially be impacted, the company said.

Management intends to commence with consultations in terms of Section 189 of the Labour Relations Act, which will be represented by the National Union of Mineworkers and UASA, followed by a 60-day consultation process, facilitated by the CCMA.

According to Gold Fields, South Deep needs to be operated and scheduled as a safe, deep-level, capital-intensive, but highly mechanised and efficient operation. This will require a reduction in fleet and the associated labour complement as well as an improvement in effectiveness and productivity to build sufficient margin in the business to carry the high fixed cost base and deliver sustainable profitability.

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, and mechanised mining approach.

According to the company, South Deep has faced persistent issues that needed to be addressed in a holistic manner which included; rising operating and overhead costs; consistent failure to meet mining and production targets; unique and complex mining method; extensive infrastructure and support services required to underpin mining activities; poor equipment reliability and productivity impacted by poor maintenance practices and operational conditions; the operation is staffed and resourced for a much higher production rate than is currently being achieved; and overall labour productivity is significantly below industry average.

Despite numerous interventions to address these challenges, the mine has made R4bn worth of losses over the past five years. However, in addition, the company has invested approximately R32bn (including the R22bn acquisition cost) since acquiring the mine, 12 years ago. As a result, management sincerely believes that the mine can no longer sustain these cash losses as they don’t align with the current lower level of production, Gold Fields said in a statement.

This is not the first time that a restructuring process has taken place at South Deep. During Q1 2018, South Deep completed phase 2 of its organisational restructuring plan through a voluntary retrenchment programme, which resulted in 261 employees leaving the company. This followed the restructuring in Q4 2017 (phase 1) at the more senior levels of the business, which comprised a 25% reduction (47 employees) in the management level.”

Although this restructuring was mostly voluntary in nature, it nonetheless had a significant negative impact on morale and consequently productivity and output during H1 2018, the company said.

Apart from the recent restructuring, South Deep continues to face a number of organisational and structural challenges that directly impacts both short and consequently long term performance. The mine did not see much improvement in Q2 2018 post the restructuring and shift changes, with production only marginally higher at 1,518kg (49koz) from 1,485kg (48koz) in Q1 2018. Similarly, the cash burn continued into Q2 2018 at R295m ($24m) compared to R361m ($30m) in Q1 2018.

Image: ©Shutterstock
Image: ©Shutterstock

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