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SA gold output lowest in 83 years

Posted: Sun, 05 Mar 2006

[miningmx.com] -- CHARLES Atlas was advertising his muscles and Adolf Hitler was brooding over his failed coup attempt in Bavaria the last time South Africa produced less gold than it did in 2005.

The latest figures from the South African Chamber of Mines showed the country’s 2005 gold output fell 13% year on year to 296.3 tons.

“This is the lowest level of gold production since the 284.6 tons recorded in 1923,” the chamber said in a statement.

This is seen as an aberration, however, when compared to the average five percent decline each year in the previous decade, it said.

The falling output was blamed on high production costs, a weak rand gold price, both of which prompted restructuring by mining companies to restore profitability.

One of the hardest hit companies was Harmony Gold, which has cut 13,000 jobs as it tried to swing its aging suite of South African mines back into the black.
It’s not a train smash
The gold output forecast for this year is less gloomy. Production costs have fallen in 2006 and the average rand gold price has topped R105,000/kg. Simmer & Jack has returned the liquidated North West Operations, formerly owned by DRDGOLD, to production.

“Given the high statistical base and the improved economic outlook for the sector, it is likely that the rate of decline in gold production will slow to a more moderate pace over the next year,” the chamber said.

South African gold output peaked in 1970 at 1,000 tonnes, but has been falling steadily since then as mines grow older. The remaining deposits are deeper, more expensive and more difficult to mine.

In the last five years, production has dropped by a third from 427 tons in 2000. “It’s not a train smash,” said David Davis, a mining analyst at Andisa Securities.

“The industry has been through a significant change. It is now poised to take advantage of the higher gold prices because it is restructured, reorganised and had its cost reduced. It’s all ready to go.”
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It would remain a robust industry albeit at lower production levels, with gold output seen stabilising around the 300 tons/year as new projects come on stream in coming years, he said.

His output forecast for this year is between 286 and 296 tons. His forecast for 2005 was 297 tons.