Gold Fields grabs for South Deep voice

With shares soured after a recent accident at the South Deep mine in South Africa, Gold Fields (GFI-N, GOF-L) has boosted its stake in the mine’s half owner Western Areas (WARSF-O).

Gold Fields picked up another 18.27 million Western Areas shares at 40 rand apiece to boost its stake to 23.27 million shares, or 15.47% of the company’s total share count.

“South Deep is a very significant gold project and we are pleased to have increased our exposure to it through this purchase,” said Gold Fields CEO Ian Cockerill in a statement.

Cockerill believes there is significant potential for regional co-operation between South Deep and his company’s Kloof mine, contiguous to the south, especially during the second, deeper phase of development at South Deep.

“We aim to play a role in achieving that co-operation,” he concluded.

South Deep is home to proven and probable reserves totalling 147 million tonnes running 6.2 grams gold per tonne, for 29.3 million contained ounces. Another 109.9 million tonnes of measured and indicated material averages 7.3 grams gold per tonne, for 25.9 million contained ounces. The estimates are based on a gold price of US$400 per oz.

Of the reserves, some 14.6 million oz. contained in 73.5 million tonnes running 6.19 grams gold are classified as phase-2 reserves, or reserves that lie beneath existing infrastructure. Gold Fields has previously shown that these reserves could be reached earlier than the planned 20 to 30 years by tunnelling some 3 km from the No. 4 shaft at the Kloof mine.

In March, archrival Harmony Gold Mining (HMY-N) picked up a 29.2% stake in Western Areas for around 44 rand a share or just shy of 2 billion rand in all. Harmony CEO Bernard Swanepoel subsequently took a non-executive seat on the company’s board.

Relations between Harmony and Gold Fields are surely still frosty at best after a protracted and often nasty takeover battle that saw the smaller Harmony scupper Gold Fields’ preferred plans with Iamgold (IMG-T, IAG-N).

Barrick Gold (ABX-T, ABX-N) inherited the other half of South Deep via its acquisition of operator Placer Dome earlier this year.

Production at South Deep is expected to be halved for up to a year after a loaded skip broke free of its winder drum during regular rope maintenance recently, plunging some 1.6 km down one of the mine’s twin shafts. The skip was followed by 6.7 km worth of high-tensile steel rope that detached from eight clamping devices on the winder drum while the skip was around mid-shaft. The shaft suffered serious damage at several points.

The mine produced 461,119 oz. gold at a cash cost of US$387 per oz. in 2005, up from the 428,585 oz. poured at US$383 apiece a year earlier.