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Mechanized mining could revive output in South Africa

Miners at Gold Fields’s highly mechanized South Deep operation

SIPHIWE SIBEKO/REUTERS

With a great clanking and an occasional dripping of water, the dimly lit elevator cage gathers speed and then plunges 2.4 kilometres below the earth's surface in an ear-popping four minutes.

It's one of the biggest and fastest vertical drops in the world, and it opens up an era of mechanized mining that could be the saviour of South Africa's struggling gold and platinum sectors.

South Deep, once the property of Barrick Gold Corp. and now owned by Gold Fields Ltd., has been the future of South African mining for a long time – perhaps too long, according to analysts who question its persistent delays.

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With more than $4-billion (U.S.) invested in it so far, South Deep boasts a huge reserve of 40 million ounces that could keep it in operation for 60 years or more, with its drills blasting up to three kilometres underground. It has been long viewed as the last great gold mine in South Africa, and potentially one of the lowest-cost producers in the world.

By gradually shifting to a greater use of mechanized mining, South African gold and platinum companies are aiming to free themselves from the crippling strikes and labour unrest that have haunted the industry for many years.

South Africa has the world's biggest gold and platinum reserves, but its share of global output has been steadily declining because of high costs, regulatory uncertainty and labour problems. South Africa was the world's biggest gold producer until 2007, but its output has plummeted from 428 tonnes in 2000 to just 167 tonnes in 2012 – its lowest output in more than a century.

South Deep, the world's seventh-deepest mine, will be a key test of the strategy of shifting away from labour-intensive mining. Last week, Gold Fields tried to win over the skeptics by bringing analysts and journalists on a tour of South Deep, showcasing the mechanized mining techniques that allowed it to shed about 2,000 jobs in 2009, when it shifted to a fully mechanized operation. Today, it operates around the clock, 24 hours a day, seven days a week.

It's an impressive sight. The workers hone their skills on computerized simulators at a training centre and a mock mine on the surface, then go underground with mechanized drills, eliminating the backbreaking strain of hand-held drills in older mines.

Where most South African mines are hobbled by narrow corridors and cramped conditions, South Deep has huge caverns and high ceilings. "You could drive a double-decker bus through it, with room for a roof rack," said one South African mining journalist who was wowed by the mine.

Yet, the company has kept pushing back its production targets. Its costs remain high, its workers have been slow to adapt to the new systems and its infrastructure has been delayed.

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Its full-production goal of 700,000 ounces a year, compared with about 302,000 ounces last year, was originally set for 2014 under its previous owners, Placer Dome and Barrick. The goal was delayed to 2016, and then to the end of 2017, with the target now reduced to a new range of 650,000 to 700,000 ounces. All-in costs are projected to drop from about $1,310 an ounce this year to below $1,000 by 2017.

"It's a world-class ore body, and it's our job to make sure we turn it into a world-class mine," Gold Fields chief executive Nick Holland told the visitors at South Deep last week.

He said he is confident of achieving the revised target, especially after hiring a team of Australian mine operators, who have decades of experience at highly mechanized mines, to train his South Deep employees. The mine has more than 5,100 employees today, with some drill-rig operators reportedly earning about $5,000 a month – far above typical wages in the mining sector.

South Africa's labour-intensive platinum sector, plagued by strikes and labour violence, is trying to make a similar shift to mechanized mining. Canadian mining tycoon Robert Friedland, whose Ivanhoe Mines is developing a massive platinum mine about 280 kilometres north of Johannesburg, has announced some of the most ambitious plans for a highly mechanized mine. He promises that his platinum workers will be "highly trained" and will work in air-conditioned comfort at the underground mine. "It's going to be as clean as a hospital," he boasted to a mining conference in Cape Town this month.

Under mechanized mining, fewer workers are needed and their skills and wages are higher, which can reduce the risk of labour unrest. "As professionals, they will be paid accordingly," Mr. Friedland says.

South Deep, about 45 kilometres southwest of Johannesburg, has many advantages, including smooth highways to its front gate. But it also battles some problems that miners don't face in Canada or Australia. Theft, for example, is a major issue. Its gold output is currently sent by helicopter to Johannesburg, avoiding the highways where it could be hijacked. But internal theft by employees and illegal miners is still common.

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South Deep's security fences and underground tunnel walls are covered with posters offering a reward of 7,000 rand (about $700 Canadian) to anyone who helps obtain the arrest of gold thieves or illegal miners – known in the Zulu language as zama-zamas (those who "try their luck").

The zama-zamas "threaten our lives, threaten our jobs, steal our money," the posters say, offering an anonymous hotline for tip-offs. A recent book by mining writer Matthew Hart estimated that about $40-million (U.S.) worth of gold was stolen from South Deep in 2011 alone.

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About the Author
Africa Bureau Chief

Geoffrey York is The Globe and Mail's Africa correspondent.He has been a foreign correspondent for the newspaper since 1994, including seven years as the Moscow Bureau Chief and seven years as the Beijing Bureau Chief.He is a veteran war correspondent who has covered war zones since 1992 in places such as Somalia, Sudan, Chechnya, Iraq and Afghanistan. More

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