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SA gold industry profitable again Posted: Mon, 04 Sep 2006 [miningmx.com] -- THE South African gold industry has been catapulted back into profit, even after investing in new projects, said the Chamber of Mines of SA. “From an average gross loss before capital expenditure in the second quarter of 2005, the industry was able to fully cover capital expenditure and be in the black a year later,” said Zoli Diliza, the chamber’s CEO. The amount of unprofitable gold production has also drastically declined. It fell to about 10% of total output between April and June 2006 from nearly 50% in the corresponding period of 2005. The improvement has been put down to the higher rand gold price, and is a far cry from fears that the industry was moribund – a popular view from about 2000. South Africa’s gold production was at its lowest level in 83 years when in March 2005, the chamber reported output of 296 tons. On a year-on-year basis, the US dollar gold price rose by 38.3% to $591/oz, said Diliza. The simultaneous weakening of the rand against the dollar, has sent the rand gold price higher, increasing 47.5% to R129,789/kg. The improvement in fortunes has led to an explosion in junior mining activities, new listings, and new gold mining projects. Both Gold Fields and AngloGold Ashanti are planning expansions of South African gold by deepening existing mines. Potential listings include Great Basin Gold, Pamodzi Gold while Simmer & Jack Mines has received a new lease on life. Wits Gold, a gold exploration company – unheard of in South Africa for years – successfully listed earlier this year. The higher rand gold price has also had a dramatic effect on the number of marginal mines, operations that respond heavily to changes in the price of gold. “The number of marginal mines fell from nine, employing 70,000 people and accounting for 48.2% of production in the second quarter of 2005, to four mines, employing 46 000 people and producing only 10.1% of production by the second quarter of 2006,” said the chamber. Restructuring in the industry was another factor behind improved profitability. “On a year-on-year basis, total production costs before capital expenditure increased by a modest 3.2% as the impact of the slowdown in restructuring costs became evident,” it said. About 95% of the South African gold production is from underground mines. However, gold production from South Africa has shrunk year-on-year, the chamber said.Free news alerts: click here to subscribe
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