SA gold output drops, again

Allan Seccombe | Mon, 25 May 2009 17:49
[miningmx.com] -- SOUTH African gold output in the March quarter of 2009 tumbled again, this time from a very low base set a year earlier when the industry was plagued by electricity shortages.

South Africa, until recently the world’s largest source of mined gold, produced 49,713 kg, 10% down quarter-on-quarter and nearly 5% lower year-on-year.

The decline is blamed in part on the year-end holiday period and the amount of time it takes mines to restart.

“The decline in production on a year-on-year basis… must be considered from the point of view that the first quarter of 2008 was a disaster for the South African mining industry due to the electricity crisis,” the Chamber of Mines said in a statement.

This year the mines don’t have the excuse of a power shortage that shut down South Africa’s mining industry for a week in January 2008, wreaking havoc with gross domestic product.

The decline has also come in a quarter when the rand gold price was nearing record highs.

Members of the chamber reported gold production dropping 7.3% year-on-year to 40,720 kg, with recovered grades falling 6.1% coupled with a 1.3% decline in processed tonnes.

“There was an increase in the use of low-grade surface materials being processed through the mills in the first quarter of 2009, as the mines attempted to try compensate for lower underground production cause by the holiday period extending into the early part of 2009.”

South Africa is the world’s third-largest gold producer behind China and the United States.

AngloGold Ashanti’s production in the first quarter came in at 1.1 million oz, below the original guidance of 1.13 million oz because of the temporary suspension of some South African underground operations for safety reasons, the slow restart of mines after the year-end break in that country as well as lower production in Africa.

Looking ahead, AngloGold expects to produce 1.14 million oz of gold in the June quarter at a total cash cost of $465/oz if the rand averages R9.25 to the dollar or $485 if the rand is at R8.60. South Africa had a spate of public holidays in April, which crimped production.

Analysts point to AngloGold maintaining its production forecast for the year at 4.9 million to 5 million oz and think the company might be putting itself under pressure to perform in the second half of the year.