Gold Fields has emerged the winner of the top prize in SA gold mining now that it has acquired full control of South Deep, one of the best unmined gold deposits left in the world.

The decisive way in which Gold Fields went after South Deep has been attributed by some observers to a more aggressive approach developed by management in the wake of the hostile bid Harmony made for Gold Fields two years ago. The Harmony bid failed but Gold Fields management had clearly been caught napping. They seem to have learnt their lesson.

Harmony made the first play for South Deep by taking a strategic stake in Western Areas, which owned 50% of the mine, but it was swiftly outgunned by Gold Fields.

First, Gold Fields bought Barrick's 50% of South Deep and then it bid successfully for Western Areas to get full ownership of the mine. Having achieved that it followed through decisively to deal with the greatest negative factor in the South Deep equation - the punitive hedge book owned by Western Areas.

Former Western Areas CEO Brett Kebble had been forced by his bankers to sell expected gold production forward at prices between US$300/oz and $400/oz as one of the conditions on the finance he raised to fund Western Areas' share of South Deep's capital expenditure programme.

The end result was Western Areas built up a multibillion rand liability on its balance sheet as the gold price zoomed to levels around $700.

Gold Fields took that hedge out in late January at a cost of R3,8bn - a move that is already paying dividends because the forward contracts were closed out at prices around $622.

The gold price subsequently resumed its upward path, moving back to above $690. The structure of the Western Areas hedge was such that every one dollar rise in the gold price increased the negative value of the hedge by another $1m.

Gold Fields' policy has long been not to hedge, but it had two other options open on South Deep. These were to leave the hedge in place and let it run down over the next eight years or restructure it by putting in more cash to make it less toxic.

Gold Fields chief financial officer Nick Holland says: "The fundamental issue was that the hedge was so far under water that it was not really a derivative anymore but amounted to a liability on the books. Restructuring the Western Areas hedge would have been like doubling the stakes in a game of blackjack. We decided the best thing to do was to get rid of the hedge, particularly as we expect the gold price to rise - meaning the Western Areas hedge could have become a millstone for Gold Fields."

With the hedge gone Gold Fields' challenge now is to select the best way to exploit the huge - 30,7m oz - gold resource at South Deep, which it can get at in two ways. These are via the existing South Deep twin shaft system and also by developing in from the existing 4 subvertical shaft at its Kloof mine, adjacent to South Deep.

Immediate plans are to get production back to the level of 450 000 oz/year at which the mine was operating before the disastrous shaft accident last year.

After that there will be a review of the best way to expand to the planned level of 800 000 oz/year by 2012. Gold Fields CEO Ian Cockerill has stated his belief that the optimal level of output from South Deep should be around 1m oz/year.

Turning to Harmony reveals that things are, at long last, looking a lot better for the group despite the fact that it was outgunned in the bidding war for South Deep. Harmony battled operationally for about 18 months as it retrenched 12 000 workers and downsized operations to cope with lower rand gold prices. The benefits of the much higher rand gold prices now ruling have been slow in coming through as Harmony's production and grade failed quarter after quarter to match management predictions.

The turnaround might at last be happening as CEO Bernard Swanepoel has finally committed to a corporate restructuring plan. This indicates Harmony intends focusing on its quality, longer-life and higher-grade operations and intends disposing of its marginal, shorter-life and higher-cost operations.

In April, Swanepoel announced Harmony was to sell its Orkney 1 to 7 shafts to Pamodzi Gold for R550m payable in cash and shares as well as a royalty on gold produced by Pamodzi from the shafts.

He also indicated the group was looking at the disposal of other marginal shaft operations, including its mines in Western Australia, the Kalgold open pit mine near Mafikeng in North West province and some of the marginal shafts in the Free State.

The main reason is a number of Harmony's new mines, on which it spent billions of rand in capital expenditure over the past five years, are about to come into production. These include Elandsrand, Doornkop South, Tshepong and Phakisa in SA, and the Hidden Valley mine in Papua New Guinea.

"We are rebalancing our portfolio according to the hand we now hold, which is very different to the one we started with 12 years ago," says Swanepoel.

Harmony is also moving to cash in on the uranium boom, albeit as a Johnny-come-lately because Swanepoel admits he was approached about Harmony's uranium assets five years ago but dismissed them as not that important.

That was then. Harmony is now assessing treating surface tailings dams at its Randfontein and Free State mines to recover the uranium contained in them.

The biggest unresolved question in the SA gold sector concerns the future of AngloGold Ashanti, where parent Anglo American stated its intention last year to dispose of its remaining 41% stake in the gold group within three years but refused to specify how. Options range from an outright sale of the shares to a merger with another gold group to create a much larger operation in which Anglo would hold a minority equity stake. Speculation on likely candidates includes Gold Fields and Russian gold group Polyus.

Meanwhile the AngloGold Ashanti share price has underperformed because it has been held back by "what some observers might call an overhang of shares in the market," says AngloGold Ashanti CEO Bobby Godsell.

Lower down the pecking order the surging gold price has rejuvenated SA's junior gold sector, now at its most active since the mid-1980s.

Pamodzi Gold has bought out Bema Gold's interests on the Far East Rand and is looking to expand aggressively through deals like the one struck with Harmony.

Ferdi Dippenaar - New Burnstone mine near Balfour

Neal Froneman's Aflease Gold is developing its Modder East mine on the Far East Rand, while Canadian junior Great Basin Gold, now run by former Harmony executive Ferdi Dippenaar, is pushing ahead with the new Burnstone gold mine near Balfour.

Simmer & Jack (Simmers) is investing heavily in the Blyvooruitzicht mine and looking to develop new gold operations around Pilgrim's Rest, while pushing ahead with the uranium projects now owned by subsidiary First Uranium Corporation, which has its primary listing in Toronto and a secondary listing on the JSE.

DRDGold has also seized on the uranium game as part of a strategy to recover from the meltdown of its Australasia and SA operations.

DRDGold intends to refocus its efforts on SA and has created a JV with Australian-listed Mintails to develop gold and uranium operations on a string of old mines on the West Rand, including the original Durban Roodepoort Deep Mine and West Rand Consolidated.