South African gold loses its lustre
• World output to hit record highs, ageing local mines in steep decline
Global gold production is expected to hit a record high this year, but SA, once the dominant player in world gold output, will play no part in the forecast.
Precious metals analysts GFMS warn of a “strong decline” from the country, continuing its downward trajectory.
SA was for decades the largest source of mined gold in the world, but after 140 years of mining, the operations have become older, deeper and more dangerous.
Falling grades, rising costs and declining labour productivity, coupled with an uncertain regulatory environment, have resulted in a precipitous drop in little more than a decade.
The local industry now employs fewer than 117,000 people from 180,000 in 2004. It is now in eighth place in global gold production rankings, barely higher than Mexico. It is also the most expensive place by far to mine gold, according to the latest report from GFMS.
GFMS forecast production would hit a high of 3,265 tonnes in 2018, with Asian countries such as Indonesia, Mongolia and China driving the increase along with Russia and Australia.
“On the other hand, the US, Tanzania and SA are expected to show strong declines year-onyear,” the report said, without quantifying by how much output would fall.
SA clung to its eighth place despite gold production falling to 140 tonnes from 146 tonnes in 2016. A decade ago SA generated 234 tonnes. China retained its top spot in 2017 with output of 426 tonnes.
In SA, the cost of producing gold shot up by 18% in 2017 to $1,010/oz, well above the global average of $878/oz, which was $41/oz higher than in 2016. About 7% of global gold production was unprofitable in 2017, the report said.
Pan African Resources is closing its Evander underground mine in SA, citing a sustained low rand gold price as the reason for laying off 1,700 people at the operation.
Pan African CEO Cobus Loots said with the rand gold price at little more than R500,000/kg underground gold mining in SA was unsustainable. He predicted more companies would close shafts.
AngloGold has shut its Tautona mine and sold two other large mines in SA, while Sibanye-Stillwater has closed its unprofitable Cookemines and is reviewing other shafts at Beatrix, Driefontein and Kloof.
Harmony Gold, which bought the Moab Khotsong mine from AngloGold for $300m, is scrambling to find alternative sources of gold as it shuts a number of old mines in the next three years.
No new gold mines of sub- stance have been built in SA, with the most recent sizeable mine, South Deep, started more than a decade ago. Gold Fields, which has spent R29bn buying and developing the mine, has yet to hit a target and bring the mine to account.
The good news for SA in the GFMS data is that it is now the leading source of gold coins, with production of 49 tonnes of coins in 2017, well ahead of the 38 tonnes from Turkey, the next biggest.