Nick Holland. Picture: MARTIN RHODES
Nick Holland. Picture: MARTIN RHODES

THE persistent troubles with South Deep remain, with Gold Fields still experimenting with exploiting the 75-million-ounce deposit — and now a R12bn lawsuit has been slapped on it, a legacy of the fraud committed by murdered mining magnate Brett Kebble.

Gold Fields said on Thursday that it was piloting two new techniques at South Deep in the hope that it would find the right method to rescue the mining programme at the vast mine that has been a perpetual underperformer.

The latest setback at South Deep is the suspension of all mining activity in a shaft that produces 70% of the mine’s output. In May the company decided to introduce "an extensive ground support remediation programme" at the mine after two people were killed and production was suspended.

Gold Fields, which unbundled most of its local assets into Sibanye Gold to focus on South Deep and its international assets, says it needs to replace its current mechanised "de-stress mining method" at South Deep. It has identified two alternatives, both modern mechanised methods, and may choose one of them next year.

"Both of these methods, if successful, could significantly derisk the South Deep build-up plan and future production profiles, and have a meaningful impact on costs," Gold Fields CEO Nick Holland said on Thursday.

The new techniques have been introduced by the team of Australian experts Gold Fields brought in to improve the mechanised mining at the mine it bought from Kebble’s companies in 2007. Gold Fields has been trying to develop South Deep for the past five years and has had numerous costly delays that have shifted its full production deadlines.

The company had planned to produce about 1-million ounces of gold by last year. It only managed to produce 302,100oz from its South African operations in the year ended December 2013.

Mr Holland said on Thursday that it would still reach its new full output target of up to 700,000oz by December 2017. "The new mine will last us some 50 years, and we’ll be able to deliver production more quickly," he said.

The change of mining strategy at South Deep is an admission that the deposit "is not what management thought it was", Momentum Asset Management portfolio manager Wayne McCurrie said. "That’s the nature of mining; it’s a very risky business. You never know what you’ll find because things are hidden down there."

The mine’s development over the past 20 years has troubled all of its owners. Gold Fields thought it could develop it successfully when it bought it from Kebble-controlled Western Areas. "We sincerely hope they’ll get it right in the end," said Mr McCurrie.

With mining technology developing, Gold Fields has had to bring the latest technology to its operations, said Vestact portfolio manager Michael Treherne.

Whether the company would meet its 2017 production as a result of the new technology was an open question, he said.

As if the operational problems are not enough, Gold Fields has now been slapped with a lawsuit by Randgold & Exploration (R&E). R&E is alleging that Gold Fields — which held 50% of Western Areas at the time — "assisted in the unlawful disposal of shares owned by R&E in Randgold Resources Limited and Afrikander Lease, which is now Uranium One." Gold Fields said the claims by R&E could be as high as R12bn, equivalent to a third of the company’s market capitalisation.

Kebble was the CEO of Western Areas and R&E at the time, two companies in which he is alleged to have illegally and discreetly siphoned off stock and other assets, a fraud that was discovered after his death in 2005.

"This alleged liability is historic and relates to a period of time prior to the group purchasing the company," Gold Fields said on Thursday. The company has instructed its attorneys to "vigorously defend the claims".

* This article's original headline “South Deep woes grow with R12bn Kebble suit” was amended as it incorrectly created the impression that this was a new claim. It is an old claim that remains unresolved.