South Africa slips to 4 in gold rankings

Allan Seccombe | Fri, 12 Mar 2010 13:03

[miningmx.com] -- SOUTH Africa has slipped to fourth spot in the global gold producer rankings after its 2009 gold output fell nearly six percent to 204,923kg, a level last seen around 1908, as grades continued to slide.

Grades fell by 11% in the December quarter from the previous quarter while they were down eight percent year-on-year, leaving South African gold output behind that of China, Australia and the United States.

The last time South African gold output was this low, Ford built the first Model T, there was the first passenger flight in an aeroplane and Albert Einstein presented his quantum theory of light. General Motors was also founded in 1908, a year in which South Africa produced 219 tonnes of gold. It produced 200 tonnes the year before.

“When the price is slightly higher, provided costs haven’t gone up too much, you can mine a slightly lower grade of gold to break even with your cost,” said Roger Baxter, chief economist at the chamber.

Mining companies would adopt this approach to extend the life of their operations in which they’ve invested a large amount of money and wanting to extract as much of the ore body as possible.

The South African Chamber of Mines revised its gold output figure for 2008 down by 2,479 kg to 217,648.5 kg because of the inclusion of scrap processing in that data.

Gold output fell by a startling 14.5% in 2008 because of the electricity shortages, which entailed mines closing for nearly a week early that year and mining houses having to cut consumption by 10%. There were also safety-related stoppages which were a contributing factor.

“The electricity crisis and the stoppages of mines and shafts for safety-related reasons (some valid and some not), had the impact of prematurely downscaling the country’s gold sector in 2008,” the chamber said in a statement.

It can be argued that this downscaling process is unlikely to be reversed, with gold producers closing shafts that have become unprofitable. It is extremely costly and difficult to re-open marginal shafts that have been shut down.

Without the electricity crisis, the rate of decline in gold output would have been around five or six percent instead of the 14.5%.

The industry has been in a spiral of declining production, with 2002 the last time South Africa recorded a year-on-year increase in gold output.