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Nick Holland braves new frontiers in the mining industryWhen Nick Holland’s tenure as Gold Fields’ chief executive officer began in 2008, the company had been forced into the defensive by a spate of challenges, including cost pressures, mine accidents and electricity shortages.
Surviving the category 5 storm, the new CEO of the second largest producer of gold in South Africa and the fourth largest in the world, with some 3.6 million ounces annually, advanced a number of safety and productivity initiatives in the group.
He also re-energised the international projects and the exploration efforts on Gold Fields’ existing portfolio, as well as into new frontiers around the globe in an effort to enhance the company’s impressive trove of 81 million ounces of gold reserves.
The words “re-energised”, “new frontiers” and “exploration” could create false illusions of a fool rushing in where angels fear to tread.
Nothing could be further from the truth.
Holland is brave, but also a meticulous researcher. He is fearless, but not interested in short-term gains at the expense of principles, human capital or steady long-term growth.
Some of his decisions might have antagonised a few stakeholders as production plummeted for a few months during the first quarter of 2009.
Holland stood firm in the midst of the production decrease as he pioneered a steely initiative to deal decisively with an alarming safety record at home, and a backlog of maintenance work.
Mine safely, or close it down
Holland made the commitment that if Gold Fields could not mine safely, it would not mine – period!
True to his word, the CEO embarked on a campaign to strengthen the safety culture in Gold Fields.
As a result, the number of fatalities declined by 55% from 47 in 2008 to 21 last year.
Holland further prioritised the rehabilitation of infrastructure at South African mines, as well as the completion of support backlog at these operations.
But these brave steps came at a price, as Gold Fields closed down a major shaft at one of the richest mines in South Africa, Kloof, for a period of six months.
In December last year, Gold Fields stopped production at the Driefontein mine for seven days because of two fatalities due to seismic events, which resulted in a loss of almost a third of the December production month.
“I wanted to make safety the core value of the company, and it starts in the office of the chief executive.
“I want a further step change in terms of our safety record for 2010, and hope to achieve a 35% reduction in fatalities,” said Holland.
Holland’s vision
Although he is upbeat about the improvement in the safety record, Holland agonised over each of the 21 fatalities.
In his personal review of 2009, he says: “I deeply regret each one of these fatalities, and it remains my personal objective, and that of every person in Gold Fields, to eliminate all serious and fatal accidents on our mines.
“While this is a profound commitment to make in an industry that is characterised by high levels of risk, especially in the seismically active deep-level mining environment in South Africa, it is a moral and commercial imperative for the future existence of our industry. (Source: Gold Fields annual report to shareholders 2009, message by chief executive).
“My other goals and dreams for Gold Fields are to make the company a more attractive destination for young talent,” said Holland.
“I also want us to live our vision. That vision is to become the global leader in sustainable gold mining in the world,” he told Leadership.
Currently, Gold Fields is the fourth largest gold producer in the world.
Is the vision to become number one an unattainable opium dream? Differently stated, are Gold Fields and its determined chief executive unrealistic Don Quixotes, storming windmills?
Changing gear after a conservative start to 2009
The remarkable final flourish in production in 2009, the completion of international growth projects and the phenomenal increases at South Deep suggest otherwise.
After reaching a production low point of 798 000 ounces in the first quarter of 2009, largely because of the afore-mentioned production interruptions, as well as a delay in the completion of certain growth projects, Gold Fields showed a steady improvement in quarterly production for the remainder of
the year.
It ended the fourth quarter with attributable production of 906 000 ounces of gold.
This represented an improvement of 108 000 ounces, or 14%, from the first quarter to the final one.
Completing international growth projects
Holland also inspired Gold Fields to complete its international growth projects.
The Cerro Corona Gold Mine in Peru was completed during December 2008. This is now a world-class mine and is operating sustainably at its design capacity of approximately 140 000 ounces of gold and 32 000 tonnes of copper per year.
At the Tarkwa Gold Mine in West Africa, the expansion of the carbon-in-leach (CIL) plant was completed as planned at the end of December 2008.
While production buildup of the expanded mill is slower than initially anticipated due to certain commissioning delays, it is expected to produce at its design capacity of approximately one million tonnes of ore per month, on a sustainable basis, during 2010.
At St Ives in Australia, the Belleisle and Cave Rocks underground mines reached full production midway through 2009, providing a foundation for an improved operational performance.
The four- to five-year target in South Africa is to produce between 2.2 and 2.5 million ounces of gold a year on a sustainable basis.
A target of one million ounces per annum of attributable production, either in development or in production, has been set for the management teams in each of West Africa, South America and Australasia. (Source: Gold Fields annual report to shareholders 2009, message by chief executive).
South Deep – from good to great
Holland also oversaw the fine-tuning of planning operations at the South Deep Gold Mine.
A comprehensive external review of the mine was done between August 2008 and January last year.
The purpose of the review was to answer three key questions: What is the full production capacity of South Deep? How long will it take to achieve? How much will it cost?
At full production, South Deep should produce approximately 750 000 to 800 000 ounces of gold per year.
It should achieve this by December 2014, and it should cost approximately R8.5 billion in real terms to complete. (Source: Gold Fields annual report to shareholders 2009, message by chief executive).
But that 800 000 goal looked very unattainable at the start of 2009. South Deep generated only 175 000 ounces per annum at the time.
“The past year we have increased development by around 50% and increased production to 300 000 ounces per year.
“In creating that momentum, we have put faith in the minds of the shareholders. That has been one of the great achievements over the last 18 months,” Holland told Leadership.
He was the chief financial officer of the company before succeeding Ian Cockerill.
Agreeing on a common goal
Holland has been an advocate of getting buy-in from employees into a common goal. “You have to agree on an action plan, and once you have that, you have to set them free to do that.
“However, I believe in a hands-on approach to regularly monitor progress,” he added.
That monitoring, though, is not a frustrating, regular chop-and-change strategy that upsets momentum.
Holland says his simple philosophy is to create value for the shareholders of the company. “Our vision, to be the global leader in sustainable gold mining, will help us to create enhanced returns for our shareholders,” he said.
Don’t sweat the small stuff
Two mentors who influenced Holland greatly were Brian Gilbertson of Gencor and Chris Thompson, former chairperson and chief executive of Gold Fields.
The former was a master at creating value for shareholders.
Thompson emphasised the importance of a clear mind – to differentiate between the urgent and important matters.
“He taught me to focus on things that really mattered. He was not impressed by long hours, but showed appreciation for people’s output.
“He always said it was not how hard you worked, but how smart,” Holland told Leadership.
Driving values
Asked what made a successful chief executive in a mining company, Holland said the key thing was to know what will drive value in the company. “You have to understand and maximise the value drivers.”
Every company goes through various cycles. Sometimes the chief executive must realise the necessity of taking tough decisions in order to restructure.
In times of turmoil, he must even be prepared to be prudent and even a little boring to add long-term value.
“All too often, companies might be seduced in going for the big deal, but in the process it might destroy a lot of value.”
It is a revealing quote, one that offers insight into the persona and character of Holland.
He convinced the company and its directors to take one small step backward during a painful and sometimes frustrating restructuring process, before making a giant leap in production at the end of 2009.
Is a new power crisis looming?
Asked about the challenges of 2010, Holland said the availability of power in South Africa was an issue.
It is a question of costs in 2010 and beyond, as Eskom has indicated that it wants to heighten its tariff.
Holland, whose company uses around 580 megawatts of power, told Mineweb that the likely impact of such an increase in tariffs could be as much as a 17-20% jump (at the originally proposed Eskom tariff hike) in costs at a group level and around 30% for the South African operations.
“That would have a very significant knock-on effect in terms of some of the more marginal shafts in our group. Heaven knows what it does to some of the production that’s more expensive than we are in the gold sector.
“Then you have to add on top of that the knock-on effects in terms of the impact on steel, cement, timber, you name it. So I’m very concerned about this,” he told Mineweb.
Grade is king
“We cannot control what will happen to power, oil, steel, cement and timber. What we can control in the mining industry, is the portfolio mix. I still believe grade is king,” he told Leadership.
“The best way to survive the increases in input costs is to deliver the potential in terms of the grade of the ore bodies, and luckily Gold Fields has ore bodies of exceptional quality where this can be achieved.”
Holland does not only want to deliver on quality, he also endeavours to grow the Gold Fields footprint globally.
He says: “Gold Fields wants to explore new frontiers and not just follow the herd in the rest of the world.
“We are looking at areas that are largely unexplored, like Central Asia – that host a number of large exploration sites – and British Columbia.”
An ambassador of South Africa’s greatness
Holland is a passionate believer in the potential of South Africa.
“We have tremendous mineral resources in this country – gold, platinum, coal.
“Our gold is contained in premium ore bodies, probably the best in the world, and at Gold Fields we are at the leading edge of mining practices and technology,” he said.
“Our infrastructure in South Africa is world class. Our roads, rail structures, power, ports and banking systems are generally comparing favourably to that in the rest of the globe.
“We have a tremendous work ethic and our people are internationally respected for their professionalism and skill,” he added.
“We possess the will in the new South Africa to work together.
“There is tremendous potential, and there is no reason why we cannot exploit these assets.
With the right approach and will, we can achieve much,” concluded Holland. ?
Fanie Heyns
