From: Reuters
Published February 25, 2008 05:28 AM

Gold Fields says jobs at risk as power crisis bites

By Sue Thomas

JOHANNESBURG (Reuters) - South Africa's Gold Fields <GFIJ.J>, the world's fourth-largest gold miner, said on Monday it would scale back at some mines and trim production, putting 6,900 jobs at risk, in response to a power crisis which has reduced electricity for industry by 10 percent.

Operations in South Africa's key mining industry were halted for five days last month because of an electricity shortage. Since then, miners have operated with 90 percent of the electricity they would normally need.

Gold Fields forecast gold production for the third quarter would fall between 20 and 25 percent compared with the December quarter due to the crisis and the impact of the Christmas break.


It also said sustainable production at its South African operations was likely to fall by between 15 to 20 percent from the fourth quarter onwards as a result of the 10 percent power cuts imposed on miners by power utility Eskom.

About 6,900 jobs of Gold Fields' total workforce of 53,000 could be affected, the miner said. The National Union of Mineworkers (NUM) will start meeting the government and the Chamber of Mines this week to talk about the jobs, it said.

"Everyone is worried," NUM spokesman Lesiba Seshoka said, adding that Gold Fields had made attempts to start talks with the 280,000-strong union. "We will be reviewing the situation as soon as we get a final report from our regions," he said.

AngloGold Ashanti <ANGJ.J>, the world's third-largest gold miner, has not announced job cuts, but see losses of 400,000 ounces in 2008 due to the power crisis.

Harmony <HARJ.J> said it had lost about 800 kg (25,720 ounces) during the five-day production halt.

"I suppose the most stark issue here is the potential for job losses (at Gold Fields)," said a Johannesburg-based gold analyst who did not want to be named.

"Harmony has announced they have already reduced their work force, their contractors, by nearly 5,000," referring to a review of the group's operations that has included selling off some of its mines, and not as a result of the power crisis.


Shares of Gold Fields, South Africa's second-largest gold miner, were down 2.37 percent at 112.82 rand, underperforming a 1.7 percent dip in the gold mining index <.JGLDX>.

Gold Fields said on Monday all non-essential electricity use had been stopped, but it would spend about 200 million rand ($25.64 million) on extra emergency power to safeguard employees in case there is a total blackout.

"The inability of Eskom to supply the mines their full power requirements, and to commit to additional electricity demand for new mining development, has caused a significant crisis in the South African mining industry," Terence Goodlace, the head of Gold Fields South Africa operations, said.

"It is paradoxical that we have to consider downscaling in the current record-high gold price environment."

Gold hit an all time high of $953.60 on Thursday, and on Monday spot gold was at $947.70/$948.50 a troy ounce.

Goodlace said all available electrical power would have to be directed to higher margin, revenue generating shafts, at the expense of lower margin shafts and a development project at its Driefontein 9 shaft.

Gold Fields said to meet its 10 percent cut in electricity, two shafts and a shaft depth extension project at Driefontein and two shafts at Kloof mine would be mothballed, closed or scaled back.

Its South Deep mine was to be restructured for geological reasons, which would be compounded by the power rationing, it said. Production at its Beatrix mine, which is less energy intensive than Driefontein and Kloof, was unlikely to be affected.

It also said it was studying opportunities to generate its own electricity at the different mines.

(Editing by Rory Channing and Jason Neely)

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