How long will the gold from South Africa last?

By Cora Llamas, Senior Analyst at GoldRate.com

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How long will the gold from South Africa last?
How long will the gold from South Africa last? Photo: Pixabay

How long will the gold being mined from South Africa last? This is the question now being asked of the country that once was responsible for producing half of the world’s gold bullions. Industry players stationed on various sites maintain that the individual mines still have an average of fifteen years of life, Still, the consensus is that the decline of one of the pillars of the national economy has been consistent and, worse, apparently irrevocable. The latest figures of the tons of the precious metal that are being sourced, as well as the revenues they bring, are the lowest since 2012.

The latest report from Bloomberg released last week bore ominous news. The production of the precious metal in 2018 was 14 percent less than in 2017. It has been dropping without fail for a straight 14 months from October of 2017 to November of 2018. The overall contribution of the mining sector to the South African economy has also been cut down from 7 percent to 6.8 percent. Meanwhile, the contribution of gold mining to the national coffers now just makes up one percent of it.

Analysts and observers have called this seemingly unhaltable development the ‘twilight’ of what was once South Africa’s proudest revenue-generator. South Africa itself used to be the largest global producer of the precious metal only a quarter of a century ago. It produced 12.9 million ounces of gold in its heyday in 2001. Fast forward to 2016, and that number scaled down to just 4.5 million ounces. The latest 2017 report says it slid down further to 4,497 million ounces.

But the economic shockwaves of the 21st century had left its mining community shaken and battered. First was the reduced output caused by the geological obstacles faced as it started to explore deeper ground. Then came rise in worker salaries and the explosion in power rates. The drop in gold prices from its heyday in the 1990s, coupled with the global financial crisis in 2008, weakened the financial position of the mining companies. Today, none of them are making significant profits including market leader Gold Fields which continues to suffer losses. The company had invested heavily in its South Deep mine, considered a “growth project”; however, its 2017 fiscal year ended with a net loss of $53 million, which is a huge and adverse reversal from its $163 million profit in 2016.

More job cuts in the mining business are expected. The 112,000-strong workforce, composed of miners and engineers, might see their numbers dwindle even further. Economists are bracing for the impact on the general population as it is estimated that one mining employee has four to five dependents. This is a blow to South Africa which, as recently as the 1980s, once had about 500,000 employees working in the gold industry at any given time.

What little that remains of this workforce frequently goes on strike, further cutting down the amount of gold being mined — and with it reducing the money going to the national economy. Leaders from South Africa’s embattled if still patriotic companies say that stopping all these strikes and resolving the issues that the miners contend with is the first slow step to the right direction. Discussions and attempts at collaboration may not prevent the so-called demise of the gold industry, but they just might slow it down. And with the gold price per gram in the region fetching R 570.20, it just might be worth the effort.

SOURCES:

https://www.bloomberg.com/news/articles/2019-01-15/south-african-gold-output-has-longest-losing-streak-since-2012

https://www.businessinsider.co.za/anglogold-ashanti-gold-fields-2019-1

https://www.mineralscouncil.org.za/sa-mining/gold

https://www.bloomberg.com/news/articles/2018-12-09/south-african-gold-industry-enters-final-phase-of-slow-death

https://goldrate.com/surge-in-gold-price-anticipated-as-asia-stocks-decline-after-china-reports-weak-trade-data/

https://www.businessinsider.com/one-shocking-chart-on-the-death-of-a-gold-nation-2017-2

https://www.forbes.com/sites/greatspeculations/2018/06/13/top-10-gold-producing-countries/

https://www.businesslive.co.za/bd/companies/mining/2018-02-14-gold-fields-reports-loss-after-year-of-heavy-investing/

By Cora Llamas, Senior Analyst at GoldRate.com

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