SA gold industry to recover in 2011

Miningmx reporter | Tue, 09 Jun 2009 10:27

[miningmx.com] -- The South African gold mining industry will continue declining up to 2010 as the cost of deep-level mining takes its toll on companies' balance sheets, business research & consulting firm Frost & Sullivan said in its latest gold mining industry review.

Frost & Sullivan projects the industry to rebound from 2011 as the issues of electricity supply and skills availability get resolved. The South African gold mining industry will continue declining up to 2010.

The rising price of gold in international markets, state-of-the-art processing and refining plants and the transformation of the South African gold mining industry will continue to be key drivers of growth, Frost & Sullivan said.

The report said the remaining deep-level gold deposits in the Witwatersrand gold basin will attract the attention of explorers and investors, given strong metal prices and the technological breakthroughs that are minimising operating costs.

However, the deep-level mining necessary in the country exacerbates safety risks and uses more electricity and diesel for the transportation of staff and ore to the surface. The effect is that deep-level mines are more costly and uncompetitive to operate.

"The South African government’s renewed focus on mine safety, declining ore grades, electricity shortages, skills shortages, increased operating cost pressures and a difficult labour environment will result in further production cuts,” metals and mining analyst Wonder Nyanjowa said.

"Mining companies are likely to be concerned with sustaining current operations rather than opening up new mines," he said.

Frost & Sullivan said gold mining companies should focus on improving operating efficiencies, cutting hedge books and containing costs at every level of their operations. The use of the latest technological breakthroughs in South Africa's deep level mines will help contain costs, the report said.

"Despite facing a host of challenges, South Africa’s gold mining sector has maintained its position in the global gold mining industry," Nyanjowa said.

South Africa produced 220 tonnes of gold in 2008. Output levels are projected to decline, before recovering in 2014.