Most SA gold mines to close in 10 years

Dewald van Rensburg | Sun, 05 Jun 2011 08:02

[miningmx.com] -- MOST gold mines in South Africa will shut down within a decade.

Despite the gold bull market of recent years, with the gold price rising sharply, South Africa’s gold reserves (gold in the ground that can be extracted profitably) are becoming depleted at a rate that, within 12 to 14 years, will mean the end of the industry on which South Africa's economy has been built.

Not only are the reserves becoming exhausted, but because of sharply rising costs more and more of the remaining reserves – those with poor ore grades and deep below the surface – would not be profitably extracted any longer.

For years it has been realised that within a decade or two the South African gold mining industry will consist only of Gold Fields’s South Deep Mine near Johannesburg.

The country’s three gold giants, AngloGold Ashanti, Gold Fields and Harmony, still hold by far the majority of reserves.

These three groups’ reserves have fallen from 6,234 tonnes to 4,238 tonnes since the beginning of 2005.

At this rate of decline their reserves will be exhausted within 13 years.

Gold Fields' big “mine of the future”, South Deep, carries a full quarter of these reserves, distorting the rate at which the reserves are shrinking. Being a new gold mine, its reserves are still on the increase.

The rate of decline of the reserves of all the other mines owned by the three giants gives them less than ten years of continued production.

About a tenth of these reserves are moreover in the form of mine dumps from which gold is being recovered.

Over the past five years there has been large-scale rationalisation in the gold industry, which has resulted in the former production of 375 tonnes/year falling to less than 200 tonnes.

The closure of shafts further reduces the available reserves because, without the infrastructure, they cannot be exploited.

South Africa still has the world’s biggest gold resource, but most of it will never be exploited because the grade of the ore is simply too low for profitable production.

Apart from the few huge mines that will survive the decade, there are some new small-scale developments like Gold One’s Modder East Mine in Springs and Great Basin Gold’s Burnstone Mine near Balfour.

Most of the sector, which currently employs 150,000 people and contributes hugely to exports, taxation and a demand for a variety of industry inputs, will however disappear.

If the current strength of the gold price should come to an end, the outlook will rapidly worsen.

Gold mines are facing not only sustained cost inflation, but will soon have to foot the bill for acid mine water, silicosis, the legacy of old abandoned shafts without owners, and hostel complexes that will have to comply with strict new standards by 2015.

- Sake24