South Africa

After extensive restructuring of this region, which took place between 2016 and 2018, at December 2019, we had two operations in the South Africa. Post-year end, on 12 February 2020, it was announced that agreement had been reached to sell all our remaining South African producing assets and related liabilities to Harmony. The transaction, which is subject to several conditions precedent, is expected to be concluded on or about 30 June 2020.

Our operations in this region are:

  • Mponeng, the world’s deepest gold mine, is located in the West Wits mining district south-west of Johannesburg, on the border between Gauteng and North West Province
  • Surface Operations comprises surface facilities in the West Wits and Vaal River areas, which process and extract gold from marginal ore dumps and TSFs. Surface Operations also includes Mine Waste Solutions (MWS)

Operating performance

Production

The South Africa region produced 419,000oz at a total cash cost of $981/oz in 2019, 14% lower than the previous year, largely due to limitations in face length availability which impacted grades following high seismicity at Mponeng. Production was also impacted by intermittent electricity due to Eskom load shedding and seismicity related safety stoppages.

Mponeng mine produced 243,000oz at a total cash cost of $976/oz in 2019 compared to 265,000oz at a total cash cost of $977/oz in 2018. The 2019 year marked the first full year in which new shift arrangements at Mponeng were implemented. The new shift arrangement represents a paradigm shift in the evolution of the mine and this has resulted in significant improvements in both safety and productivity. Employees have responded positively to the new schedule, resulting in a 44% year-on-year improved safety performance (AIFR) and a 11% uplift in productivity.

Production of 176,000oz at Surface Operations improved for the year driven by a 3% increase in production at MWS, from improved recoveries with the introduction of the Aachen Shear reactor and other initiatives aimed at enhancing efficiencies.

The main drivers for the improved delivery at the Surface Operations were primarily due to:

  • Improved throughput from better operational performance delivery by the contractor; stabilised duty cycle of the comminution circuits
  • A change in strategy to process Mponeng marginal ore dumps (MOD) through the Savuka Gold Plant
  • General metallurgical process efficiencies
  • Implementation of grid sampling and grade profiling strategy

The impact of inclement weather remained significant during 2019. A remote reclamation project is currently underway with the aim of reducing inclement weather disruptions to production. The current situation at Eskom also remains a concern as MWS is not able to fully function on emergency power and therefore any interruptions caused by Eskom load shedding directly impact production activities.

Costs

Costs benefitted from operating efficiencies as well as a weaker rand/dollar exchange rate, resulting in a 5% year-on-year decrease in total cash cost. This was partially offset by lower gold output from the region. Cost reduction initiatives aimed at calibrating both on- and off-mine cost structures progressed well through the year in line with our focus on Operational Excellence.

All-in-sustaining costs for the region were $1,132/oz, down 4% despite the headwinds related to production and inflationary pressures. The region successfully delivered on its targeted cost savings initiatives for 2019.

Through our Operational Excellence initiatives, cost and capital management remained a key priority as we continue to maintain asset integrity and safety performance. Project initiatives include a wide array of activities aimed at improving metallurgical recoveries and throughput and cost saving initiatives.

Operational Excellence began at Mponeng in 2019 and included working to increase face length availabilities, improve recovery and mine call factors, reduce power consumption, and optimise capital spend.

Capital expenditure

Total capital expenditure for the region was $57m, compared to $73m in 2018. This was mainly spent on the completion of the Mponeng Phase 1 project, Ore Reserve development (ORD) work, as well as the Mponeng life-of-mine extension feasibility study. Sustaining capital expenditure was spent on a variety of stay-inbusiness projects and the rehabilitation work related to the Carbon Leader project.

Sustainability performance

In the South Africa region, our principal sustainable development activities relate to the following material issues:

Employee safety

There were no fatalities in the South Africa region in 2019, the region’s safest year on record. The AIFR was 6.60 per million hours worked for the year, a 36% improvement year-on-year. Safety interventions have included changes in planning and information systems, the introduction of a new way of mining, and a change in shift arrangements as of November 2018.

To create additional safety awareness during the festive season, a campaign named Khumbul’ekhaya, an Nguni word meaning ‘remember home’, was launched in the last quarter of 2019 and rolled over into 2020 to encourage mineworkers to return home healthy and safe every day. Khumbul’ekhaya was developed by South African mining companies to drive and sustain the local gold mining industry’s pursuit of Zero Harm.


Employee and community health

The proposed sale of our South African assets will alter the health profile of the Company as currently most of our occupational disease issues, such as silicosis (see the case study, Court approves settlement of silicosis and TB class action from the <SR>) and noise-induced hearing loss relate to our South African mines. There were 12 cases in 2019 significantly down from 35 in 2018.


Contributing to resilient self-sustaining communities

Socio-economic development (SED) initiatives are vitally important if we are to ensure self-sustaining communities. In South Africa, support for SED initiatives, which includes promoting alternative livelihoods, continued with variable outcomes. The Masakhisane Enterprise Development Fund, which provides interest-free loans, continued to support local business development projects disbursing a total of $1.04 million in 2019. Following consultation, a new social and labour plan for the 2020-2024 period was submitted to the Department of Mineral Resources and Energy for approval.


Responsible environmental stewardship

There were two reportable environmental incidents in the region in 2019. In the first incident, which occurred on 2 September 2019, the residue tanks at Savuka’s gold plant overflowed, ultimately affecting the Wonderfonteinspruit. Immediate response measures were put in place to stop, monitor and mitigate the effects of the spill. The second occurred on 20 September when a pipeline conveying tailings from the MWS plant to the Kareerand TSF, failed near the Koekemoerspruit crossing. Further details of these incidents are provided in the Mponeng and Surface Operations’ <OP>.

Recovery of the impacted section of the Koekemoerspruit will be assessed through in-stream bio-monitoring by an independent specialist, following clean-up of the watercourse and adjacent surface areas impacted by the spill.

At our West Wits operations, we continue to manage acid mine drainage (AMD) that flows from disused neighbouring mines. We have carefully managed the risk of water spilling from the West Wits water circuit by balancing our site water inventories. This somewhat delicate balance has thus far been achieved by accelerated water evaporation technologies and by using the water for the reprocessing of old tailings storage facilities once its acidity has been neutralised.


Artisanal and small-scale mining

Illegal and ASM mining activities continued to pose a significant challenge to our operations throughout 2019 in South Africa where gold producers continued to face an escalation in violent crimerelated activities as a result of large armed criminal groups and illegal miners intruding into and invading mining areas. As a result, the region’s Mines Crime Combatting Forum (MCCF) eight-pillar initiative was launched to address general criminality resulting from the increase of illegal mining activities.


Navigating regulatory and political uncertainty and risk

In South Africa, the industry, through the Minerals Council, is challenging aspects of the September 2018 Mining Charter III. The main issue is non-recognition of the continuing consequences of previous black empowerment transactions in relation to mining right transfers and renewals. While agreement through engagement is the preferred approach, the Minerals Council lodged a legal application for a review of that and two other aspects of the charter in March 2019. A court date is expected during 2020.