Gold has finally climbed out of its 25-month black hole
COAL, GOLD AND the platinum group of metals (PGMs) were the largest contributors to mining production, dipping 3.1 percent year-on-year in November, though gold on its own inexplicably turned into a positive 5.2 percent increase in output after 25 consecutive months of being in a black hole.
Mining production figures from Statistics South Africa (StatsSA) released yesterday indicated that platinum’s by-products palladium and rhodium, which make up 23.7 percent of the mining basket, fell sharply by 13.5 percent year-on-year, contributing a negative 3.6 percentage points to overall production. Iron ore was at a negative 7.5 percent output and accounted for -0.7 points, similar to coal’s negative 2.8 percent decline.
This all accounted for a seasonally adjusted mining production decline of 0.9 percent in the three months ended November 2019, compared with the previous three months.
Investec Economist Lara Hodes in a note said November’s reading was notably below consensus expectations of a negative 0.2 percent year-on-year, reflecting an increasingly strained mining sector, facing a myriad of challenges.
Hodes pointed out that specifically, unpredictable electricity supply continues to undermine operational efficacy, while the constrained global demand for industrial metals weighs on South Africa’s export potential.
Juan-Pierre Terblanche, Survey Statistician at StatsSA, said the November overall figures index at 99.2 points came off a high base, compared to the previous year, when the overall index was at 11.4 points.
Terblanche said that there were no apparent influences such as industrial action, load shedding, mine falls or closures.
“99.2 points is frankly not all that bad, but compared to the figure from a year before, …well, you can understand it,” he said.
Terblanche said that gold has been the major surprise, again for unexplained reasons, after it beat a 25-month slump to meet increasing demand and higher prices.
“That was a first positive since September 2017, it had been declining since forever and then miraculously in November it turned positive,” he said.
Hodes pointed out that the jury was out on the December figures, after heightened rotational load shedding in December forced many large miners to scale back production, which does not bode well for the quarter’s headline outcome, with the mining sector likely to detract from the fourth quarter’s GDP outcome.
“Mining as a highly energy-intensive sector relies on consistent, affordable electricity supply to operate optimally”, she said.
Meanwhile South Africa will host the annual Investing in African Mining Indaba, the largest mining investment event in Africa, to be held in Cape Town next month.
The event is expected to facilitate deal making and boost investment opportunities for the continent.