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S.African gold, platinum output to rise
Allan Seccombe
Posted: Mon, 17 Sep 2007

[miningmx.com] -- SOUTH African mining output is forecast to pick up in the medium term as companies pour money into the sector and because of a firmer rand, Investec said.

“Ongoing robust capital investment in the mining sector should cause sustained recovery in mining production in the medium term,” Investec’s Lesiba Mothata and Annabel Bishop said in a research note dated 14 September.

Supply constraints and industrial action in the mining sector slowed production growth down to 0.2% in the second quarter of 2007 compared to the first quarter.
sustained recovery in mining production
A lack of transport capacity to move coal out of the country, combined with routine platinum smelter shutdowns and high costs in the gold sector also played a role, Investec said.

South African gold production fell 5.2% in July compared to the same month a year ago, Statistics South Africa said last week.

In June, year-on-year gold sales fell 8.1% to R3.3bn, while sales of non-gold minerals increased by 18.1 percent to R16.8bn.

Non-gold mineral output was up 1.9% in July.

“Current investment in rail and ports infrastructure should aid the efficient export of mineral products,” Investec said.

The platinum and coal sectors will remain strong because of continued global demand for these products during the latter half of 2007 and into next year.

Platinum generated R65bn in foreign currency for South Africa in 2006, as much as gold and coal combined.

Gold miners operating in South Africa upped their capital expenditure by 40% in the first quarter of the year to R1.6bn, according to South Africa’s Chamber of Mines.

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“Lacklustre performance of gold production in South Africa for the last decade has encouraged capital investment to upgrade production volumes,” Investec said, adding improved efficiencies would also lift output.

South African gold output fell to its lowest level in 84 years in 2006 because of declining mining grades. Production in 2006 was 275,119kg in 2006, some 7.5% lower than the previous year.

A 44% increase in the rand gold price in 2006 has prompted gold companies operating in South Africa to pour cash into their mines through deepening projects, brownfield expansions, de-bottlenecking exercises and underground development programmes.

Gold Fields is deepening its Driefontein and Beatrix mines. AngloGold Ashanti has a similar exercise at its Mponeng mine.

Capital expenditure by Chamber of Mines members was up a chunky 62% to nearly R6bn in 2006, bearing in mind that a lower gold price of R90,500 in 2005 led to mining companies cutting back on capex.

“The big pick up in capex implies the industry is catching up on the capex it dropped in 2005, but it also reflects their optimism that they can get back into areas they should be mining,” the Chamber’s chief economist Roger Baxter told Miningmx earlier this year.

South Africa has an estimated 20,000 tonnes of gold between current mining depths and up to about four kilometers that can still be physically mined, but of this only about half would be economically viable at current prices, he said. “The rise in the gold price recently has certainly increased the portion of gold that we can recover economically from underground and that bodes well for the short-term future,” he said on the World At Six week-nightly business broadcast.