Gold mining in slow death phase in SA

South Africa’s 130-year-old gold industry, which has produced half the bullion ever mined on earth, is locked in the final stages of a decades-long death spiral. Most of SA’s gold mines are unprofitable at current prices.

Dwindling output has cut gold’s contribution to little over 1% of the SA economy, down from 3.8% in 1993. While the industry’s demise won’t reverberate in the way it once would have, the mines minister has criticised Gold Fields’s plan to cut jobs as the ANC seeks to shore up its base before elections next year.

Mines run by Gold Fields and Sibanye Gold have been halted by strikes over job cuts and wages respectively. Both producers cut their output projections for this year.

SA’s gold industry now employs just over 100 000 people, less than a fifth of the number that used to power the apartheid economy. The economic and social impact of a further contraction in the industry will be magnified as every gold miner supports between five and 10 dependants, while creating two jobs elsewhere, according to SA’s Minerals Council.

“Higher wages and power prices, combined with the geological challenges of the world’s deepest mines, will mean more job losses and less production in SA over the next five years,” said Gold Fields CEO Nick Holland.

“When you work out the math, when you keep doing that year after year, you are going to go out of business very quickly. The industry will just continue to see a slow death.”

Sibanye, the country’s biggest producer, faces wage strikes at three of its mines. CEO Neal Froneman acknowledged that pressure was building up on the miner to resolve its safety problems after more than 20 fatalities this year. If that could be done, he was optimistic that SA’s gold mines could survive a little longer.

“It’s an industry in decline, yes, and if sunset means the sun setting in 10 years or 15 years, that’s still 10 or 15 years away,” he said last month. – Bloomberg

When you work out the math, when you keep doing that year after year, you are going to go out of business very quicly. The industry will see a slow death.

Nick Holland Gold Fields CEO