Ian Cockerill, CEO, Anglo Coal
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» AngloGold studies deepening SA mines
» Analysts bearish on SA gold production
» SA gold output lowest in 83 years
» SA gold production to fall further

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SA gold supply to continue falling
David McKay
Posted: Fri, 11 May 2007

[miningmx.com] -- NEWLY mined gold from South Africa would continue to decline or level off at best, said Ian Cockerill, CEO of Gold Fields which derives about 2.52 million oz/year from the country, equal to 60% of production.

South Africa, which comprised about 66% of world production in the 1970s, produced 275 tonnes in 2006, a 7.5% year-on-year reduction, and the lowest output since the General Strike in 1922.

Cockerill also said the days of large underground orebodies, such as contained in the Witwatersrand Basin, were over. "All the easy gold has been mined," he said speaking at an address in Johannesburg. "You now have to go to exotic parts of west Africa or even Venezuela."

There were not many deposits yielding the same gold as they did in the Seventies, while the possibility of new very deep mines being developed was low. "In this day and age, investors don't want to wait 15 or 20 years to get a return on their investment."

However, Cockerill did not rule out the possibility that South African gold miners would one day mine below four kilometres. "That [4km] seems to be a technical barrier at the moment.

"There's 800 million oz still in the Witwatersrand but the deeper you go the more patchier the grade becomes. Virgin rock is also about 60 degrees centigrade so the cost of refrigeration will be prohibitively high," he said.

Gold Fields recently bought the South Deep mine for $3bn, one of the last large orebodies on the Wits Basin and which descends to about 3km. In September, the company's board approved the deepening of its flagship mines, Driefontein and Kloof, situated on the west Rand in a R4.7bn investment.

Gold Fields will spend R3.3bn at Driefontein alone deepening its 9 Sub-vertical shaft to 4.121 km, making it the deepest mine in the world.

Falling sources of primary supply was one of the reasons Cockerill said he was confident of a four-digit gold price. "Even if the gold price were to go to $1,500/oz today, you would not see a reaction soon. New projects are insufficient to replenish consumption and it's not easy to find new production," he said.

"I would not be surprised to see the gold price going up further and to four digits in the medium term."

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Commenting on royalties, Cockerill said governments had to strike a balance between deriving value out of resources investments and not "killing the goose that lays the golden egg."

"Every time you add a new royalty, you increase the paylimit. It becomes increasingly difficult to make it back."

And on the skills shortage, Cockerill said there was a number of pit managers that were establishing their own companies in fresh IPOs owing to the commodity boom. But many of them were not skilled. "Some of them are about as useful as a chocolate teapot," he said.

This implies Cockerill believed some new junior mining or exploration firms would leave investors high and dry because they were not technically accomplished.