Gold Fields Limited - Electricity Crisis Puts 6,900 Gold Fields Jobs at Risk and Further Effect on Production



    Teleconference

    JOHANNESBURG, South Africa, Feb. 25 /CNW/ - Gold Fields will host a
teleconference on Monday, February 25, at 16:30 Johannesburg time, to discuss
the impact of the power rationing on its South African Operations. The details
of the teleconference appears at the bottom of this press release.
    Gold Fields Limited gold production for the current quarter (Q3 F08) is
forecast to decline by between 20% and 25% against the December quarter
(Q2 F08), as a result of the total suspension of production for one full week
due to power constraints, continued power rationing, and the seasonal impact
of the Christmas break.
    It is further confirmed that, as a consequence of the 10% power reduction
imposed by Eskom, sustainable production at Gold Fields' South African
operations is likely to decline by between 15 and 20 percent from the June
quarter (Q4 F08) onwards, as previously advised.
    Eskom has indicated that the current quota of 90% of average historic
electricity consumption will remain in force for at least five years, through
to 2012.

    
    To achieve the 10% reduction in electricity consumption imposed by Eskom
the following actions are proposed:

    -   The Number 6 and 7 shafts as well as the 9 shaft Depth Extension
        Project at Driefontein, and the Number 3 and 8 shafts at Kloof Gold
        Mine, are to be mothballed, closed or scaled back, potentially
        affecting approximately 4,900 employees at these two mines.

    -   South Deep Gold Mine is to be restructured as a result of the
        depletion of the Ventersdorp Contact Reef horizon above 95-level and
        a new strategy implemented which focuses primarily on the completion
        of the twin shaft infrastructure and development capital programmes.
        This too is unfortunately compounded by the power rationing. The
        total number of South Deep employees potentially affected is
        approximately 2,000.

    -   Production at Beatrix Gold Mine is unlikely to be affected by the
        reduction in power supply.
    

    The total number of employees and contractors potentially affected at all
of Gold Fields' South African mines is 6,900 out of a total employee
population of 53,000.
    Engagement with all relevant stakeholders, including Unions and
Associations, have commenced with a view to ameliorating the impact on
affected employees. All alternatives will be considered to save jobs,
including options such as early retirement, voluntary retrenchments,
contractor replacement and redeployment elsewhere in the group. The National
Union of Mineworkers however asked management to hold back on the issue of
"section 189 letters" commencing formal retrenchment discussions, until the
Union had completed a series of meetings with Government and the Chamber of
Mines, scheduled for 26, 27 and 29 February 2008.
    Terence Goodlace, Head of South African Operations for Gold Fields
Limited, said: "The inability of Eskom to supply the mines their full power
requirements, and to commit to additional electricity demand for new mining
projects currently in development, has caused a significant crisis in the
South African mining industry. It is paradoxical that we have to consider
downscaling in the current record-high gold price environment. To ensure
sustainability of production and the security of the associated jobs, albeit
at reduced levels, all available electrical power will have to be directed to
higher margin, revenue generating shafts, at the expense of lower margin
shafts and the Driefontein 9 shaft development project."

    
    The above proposals were determined only after extensive and thorough
review, including the following:

    -   In order to optimise the use of available electricity, and to
        ameliorate the impact on production, a number of electricity savings
        and optimisation projects are at various stages of implementation on
        all mines. All non-essential electricity use has been stopped;

    -   Gold Fields operations have implemented a number of demand-side
        management projects, diverting approximately 50 MW of electricity
        consumption to off-peak periods. Projects to divert a further 100 MW
        is currently in progress or awaiting approval from Eskom;

    -   All operational plans and capital projects have been restated within
        the constraints of available electricity, and to divert available
        electricity to higher margin areas at the expense of lower margin
        areas and non-essential capital projects.
    

    Gold Fields is currently controlling its average power usage to 540 MW,
down from the historical average of 601 MW.
    To provide some safeguard against future electricity cut-backs from the
current 90% level, a number of opportunities for self-generation of
electricity at the different mines are currently undergoing feasibility
studies. Gold Fields is to spend some R200 million on additional emergency
power to safeguard employees in the case of a total blackout. The health and
safety of our employees remains our top priority. This programme is to be
completed by calendar year end.

    Operational Guidance

    Driefontein Gold Mine: Nos. 6, 7 and 9 Shafts

    At Driefontein it is proposed that a) Driefontein 6 shaft be placed in a
phased closure with only cleaning and reclamation activities taking place
until final closure by December 2008, and b) Driefontein 7 shaft be mothballed
with immediate effect.
    It is also proposed that the Driefontein 9 Shaft Depth Extension Project
be suspended and deferred and the electrical power currently being utilised at
9 shaft will be re-directed to the number 3 plant. The 9 shaft project is a
life extension project and includes shaft sinking; the construction of a sub
vertical shaft complex; and the completion of infrastructure required to
access 8.5 million ounces of gold reserves from depths of 3,500 metres to
4,120 metres below surface. This project would extend the life of the
Driefontein Gold Mine from approximately 2025 to 2035. The suspension of the 9
shaft project ensures that Gold Fields can fund the capital programme at South
Deep.
    Specialist shaft sinking contractors were awarded the mining contract to
develop the Depth Extension project and 930 people currently employed on the
project would be affected by the suspension of work on the project. Capital
expenditure of approximately R 5.4 billion over the next ten years was planned
on the development of this project. This new mine would require an energy
demand of approximately 110 MW and a guarantee from Eskom of their ability to
supply this future energy to meet the planned production requirements.
    In the March 2008 quarter production from Driefontein Gold Mine is
expected to decline by 1,500kg to approximately 5,900kg and total cash costs
is likely to increase from R94,390/kg to R116,250/kg. The bulk of this impact
is attributable to the week long power shut down during the quarter, followed
by lower production with the constraint of only 90% of power, with some
contribution from the seasonal decline due to the Christmas break.
    Steady state sustainable production from the June 2008 quarter and
onwards should decline by approximately 608kg to approximately 6,800kg per
quarter at cash costs of approximately R102,150/kg compared to the December
2007 quarter.
    In total approximately 2,600 of Driefontein's 18,500 employees (including
contractors) may be affected.

    Kloof Gold Mine: Nos. 3 and 8 Shafts

    At Kloof it is proposed that Kloof 8 shaft be mothballed and production
terminated with a loss of approximately 300 kg of gold per quarter. Pumping
infrastructure in the shaft would be maintained. Kloof 3 shaft would be scaled
back and production reduced by approximately 510 kg per quarter to 840 kg per
quarter.
    In the March 2008 quarter production from Kloof Gold Mine is likely to
decline by 1,700kg to 5,450kg and total cash costs is likely to increase from
R91,029/kg to R115,200/kg. The bulk of this impact is attributable to the week
long power shut down during the quarter, followed by lower production with the
constraint of only 90% of power with some contribution from the seasonal
decline due to the Christmas break.
    Steady state sustainable production from the June 2008 Quarter and
onwards should decline by approximately 1,270kg to approximately 5,910kg per
quarter at cash costs of approximately R104,061/kg compared to the December
2007 Quarter.
    The mine has formally requested an additional 8MW from Eskom due to
difficulties experienced in re-establishing safe production levels. Additional
electricity is required to operate a recently commissioned refrigeration
plant, a recently commissioned underground booster fan, and pumping
requirements.
    In total approximately 2,300 of Kloof's 17,200 employees (including
contractors) may be affected.

    South Deep Gold Mine

    Since acquiring South Deep in January 2007 the mine has not achieved the
planned increased ore production as proposed in the feasibility study compiled
by the previous joint venture owners (the Joint Venture Feasibility Study).
The mine has produced on average 108,000 tons per month of ore from
underground, which is 71% of planned production, whilst incurring 105% of the
full planned production costs.
    A full strategic review of the existing mine plan has concluded that the
current installed shaft infrastructure will not support the feasibility scope
of mining activity which includes ore reserve development and the build-up of
production to the envisaged 330,000 tonnes of ore per month. The South Deep
Twin Shaft infrastructure is still under construction and has inadequate
installed refrigeration, ventilation, water pumping and ore handling
facilities.
    The inability to reach previously planned levels of production has been
compounded by recent structural geological changes, specifically in the
conventional mining areas of the Ventersdorp Contact Reef (VCR). The
conventional mining of the Ventersdorp Contact Reef (VCR) above 95-level
intersected the Waterpan fault some 12 months earlier than predicted and this
loss of mining face, in addition to the stopping of the two other VCR mining
areas, which encountered poor ground and unsafe conditions, has resulted in no
conventionally mineable areas being available to mine. As a consequence, all
conventional VCR mining has been stopped.
    To ensure that South Deep is optimally developed for the long-term
benefit of all stakeholders, and to correct the constraints imposed by the
incomplete shaft infrastructure and inadequate ore reserve development on the
future viability of the mine, it is proposed to restructure the mine to
address these constraints. The delivery of the capital infrastructure and the
development of the ore body have to be the primary focus for the next
18 months.
    During this period ore production will be constrained to between 80,000
and 100,000 tons per month (200,000 ounces of gold annualised) from only the
mechanised trackless sections of the mine and, to a lesser extent, from the
mechanised mining of the "de-stress cut".
    The proposed restructuring is likely to affect 2,000 of the 6,000 people
(including contractors) employed at the South Deep Gold Mine.
    Earlier indications were that it may have been possible to redeploy up to
1,530 of the affected South Deep employees to other operations in the Gold
Fields Group. However, the imposition of the power rationing to 90%, and the
affect that this is having on employment levels at, in particular Driefontein
and Kloof, mitigates against this as an option.
    The national power crisis would have required South Deep, at 90% of
average power usage, to have reduced from 66MW to 59MW. South Deep could not
have sustained the conventional mining section in the VCR at 59MW. It is
likely that this area would have been stopped on the basis of inadequate
power, had the structural geological change not intervened.
    In the March 2008 Quarter production from South Deep Gold Mine is likely
to decline by 700kg to approximately 1,400kg and total cash costs is expected
to increase from R147,719/kg to R237,200/kg. The bulk of this impact is
attributable to the week long power shut down during the quarter, followed by
lower production with the constraint of only 90% of power with some
contribution from the seasonal decline due to the Christmas break. In addition
the mine is still fully staffed for the now depleted conventional VCR mining
section.
    The production for the June 2008 quarter should decline by 860kg to
approximately 1,200kg at cash costs of approximately R250,000/kg compared to
the December 2007 quarter. Once restructuring is completed it is planned to
operate the mine at unit costs of R160,000/kg with production at between
1,400kg and 1,500kg a quarter. Capital spend is planned at R1 billion for
F2009.

    Beatrix Gold Mine

    Production at Beatrix Gold Mine will be unaffected by the electricity
rationing as it is in a position to absorb the 10% reduction in electricity
through a number of power savings and generation projects presently being
implemented. This mine is less energy intensive than the deeper Driefontein
and Kloof operations.
    In the March 2008 Quarter, production from Beatrix Gold Mine is expected
to decline by 1,004kg to approximately 2,644kg and total cash costs may
increase from R108,058/kg to R150,908/kg. The bulk of this impact is
attributable to the week long power shut down during the quarter, followed by
lower production with the constraint of only 90% of power with some
contribution from the seasonal decline due to the Christmas break.
    Steady state sustainable production from the June 2008 quarter and
onwards should increase by 35kg to approximately 3,733kg per quarter at cash
costs of approximately R108,210/kg compared to the December 2007 Quarter.
    The forecast information has not been reviewed and reported on by the
Gold Fields auditors.

    About Gold Fields

    Gold Fields Limited is one of the world's largest unhedged producers of
gold with attributable production of more than four million ounces per annum
from eight operating mines in South Africa, Ghana and Australia.
    A ninth mine, the Cerro Corona Gold/Copper mine in Peru, is expected to
commence production by mid 2008 at an initial rate of approximately
400,000 gold equivalent ounces per annum.
    The company has total attributable ore reserves of 92 million ounces and
mineral resources of 252 million ounces.
    Gold Fields employs some 53,000 permanent employees across its operations
and is listed on the JSE Limited South Africa (primary listing), the New York
Stock Exchange (NYSE) and the Dubai International Financial Exchange (DIFX).
    All of Gold Fields' operations are ISO14001 certified. For more
information please visit the Gold Fields website at
http://www.goldfields.co.za.

    
                               Teleconference
                           Monday February 25, 2008

                           For Johannesburg: 16:30

                     For United Kingdom: 14:30 hours GMT

                   For Europe: 15:30 hours, European time

                 For North America: 09:30 a.m., Eastern time
    

    Gold Fields Limited will be hosting a teleconference to discuss the
impact of the power rationing on its South African operations on Monday,
February 25 at the times listed above. A set of slides for the teleconference
will be available on the Gold Fields website http://www.goldfields.co.za, two
hours before the start of the teleconference.

    
    Dial in Numbers

    South Africa     Toll: 011-535-3600     Toll-free: 0800-200-648
    USA              Toll: 1-412-858-4600   Toll-free: 1-800-860-2442
    Australia                               Toll-free: 1-800-350-100
    United Kingdom                          Toll-free: 0800-917-7042
    Canada                                  Toll-free: 1-866-519-5086
    Europe
     and other       Toll: +41-916-105-600  Toll-free  +800-246-78-700

                           Ask for Gold Fields call

                         Simultaneous Audio Webcast
            Available at our website, http://www.goldfields.co.za

                 Digital Replay Available One-Hour After Call
                             Playback code: 2541
                         (Available for seven days)

                    South Africa & Other: +27-11-305-2030
                             USA: 1-412-317-0088
                        United Kingdom: 0808-234-6771
                    Europe: +41-91-612-4330 (Switzerland)
                           Australia: 1-800-091-250
    





For further information:

For further information: Enquiries re teleconference: Francie Whitley,
Phone: +27-11-644-2505, Fax: +27-11-484-0639, Franciew@goldfields.co.za.
Enquiries: Reidwaan Wookay, Tel: +27(0)11-644-2665, Mobile: +27(0)84-878-4566;
Andrew Davidson, Tel: +27(0)11-644-2638, Mobile: +27(0)82-667-7203


Custom Packages

Browse our custom packages or build your own to meet your unique communications needs.

Start today.

CNW Membership

Fill out a CNW membership form or contact us at 1 (877) 269-7890

Learn about CNW services

Request more information about CNW products and services or call us at 1 (877) 269-7890