Gold miners buffeted by costs

Western Australia’s second largest gold miner says turnover among some of the specialist skilled trades in the sector has increased to 50 per cent.

Releasing its interim results today, global miner Gold Fields said its operating environment remained challenging.

Elevated cost inflation and strong competition for skills in its key mining jurisdictions presented significant headwinds.

In Western Australia, which accounts for 40 per cent of its global production, the company said the shortage of skilled staff continued to impact on performance.

“Turnover of some of the critical skills categories, such as mobile equipment operators, geologists and geotechnical engineers and supervisors, reached annualised levels of 25 per cent to 50 per cent in H1 2023,” it said.

“This is also having an impact on mining costs, as salaries for these skills are continuing to escalate.”

Sydney-based Evolution Mining, which operates the Mungari gold mine in WA’s Goldfields, also highlighted cost pressures.

Production at Mungari increased to 135,000 ounces but All-In Sustaining Costs increased to $A2,083 per ounce.

This was attributed to a tight labour market leading to a higher reliance on contract labour and inflationary pressures on inputs.

Despite the cost challenges, Gold Fields interim chief executive Martin Preece said the company delivered solid operating results for the latest half-year.

Mr Preece, who is based in South Africa, was in Perth this week with the company’s entire board and executive team.

“The board needs to be more visible,” he said.

“Each year we will do one of our board meetings in one of our regions and get out to the mines.”

Mr Preece said the global executive team was learning lessons from the local operations.

“There are a lot of things that are done in Australia that are a whole lot better than in South Africa.”

Mr Preece praised the fiscal and political stability in Australia, saying it continued to be an attractive jurisdiction.

The company posted a half-year profit of $US475 million, down 11 per cent, while normalised earnings decreased by 9 per cent.

The company contained All-In Cost increases to 3 per cent.

Attributable gold production for H1 2023 was 1,154koz, a 4 per cent decrease, reflecting the planned decline in production from its Damang mine.

Its four Australian mines met their production plan for Q2 2023, producing 267,000 oz at an AIC of A$1,942/oz during Q2 2023

That brought production for H1 2023 to 509,000oz, down 3 per cent.

This was mainly due to lower production at Agnew (down 7 per cent), Granny Smith and St Ives while production at the Gruyere mine was up 1 per cent.

Gold Fields remains on track to meet the production and cost guidance provided in February 2023 but the outlook for Gruyere has changed.

Production from Gruyere for the full year is now expected to be between 320,000oz and 350,000oz on a 100 per cent basis, compared to previous guidance of 340,000oz to 370,000oz.

In addition, costs at Gruyere are likely to be at the upper end of the A$1,540/oz – A$1,660/oz guidance.

It attributed these changes to the impact of reduced mining volumes in the first six months of the year combined with higher production costs as a result of inflationary increases, partially offset by a lower capital expenditure forecast.

Mr Preece said Gold Fields would continue to invest in training, culture and technology to deal with skills shortages and rising costs.

Based on production from its WA mines, Gold Fields is the second largest gold miner in the state, according to Business News’ Data & Insights.

Perth-based Northern Star Resources is the only miner with higher production from its WA operations.

Meanwhile, Evolution has reported a net profit of $163.5 million for the year to June 2023, about half last year’s level.

Underlying profit and EBITDA were also lower.

Its shares closed 4.8 per cent lower on the ASX today at $3.36.