South African gold output continues to fall – how much further? – by Lawrence Williams (Mineweb.com – July 12, 2013)

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South Africa’s vitally important minerals sector saw further production falls in May with the once dominant gold sector declining by a further 14.6% year on year.

LONDON (MINEWEB) –  How the mighty have fallen! Not so long ago South Africa dominated global gold output with the rest coming nowhere in comparison, but the country’s gold output has been on the decline since the 1970s.

It fell to fifth largest gold producer in 2012 when it was overtaken by Russia and on the latest output figures the country has drifted downwards towards being now only the world’s sixth largest gold producer, having been overtaken by Peru as well – however that is on production so far this year.

In yesterday’s publication of minerals output and revenues, Statistics South Africa noted that the country’s gold output fell again in May commenting that its ‘overall mining production decreased by 0.7% year-on-year in May.The largest negative growth rates were recorded for ‘other’ metallic minerals (-32.3%), diamonds (-19.7%) and gold (-14,6%). The main contributor to the 0.7% decrease was gold (contributing -2.4 percentage points). Manganese ore (contributing 1.5 percentage points) was a significant positive contributor.’

But will there be any recovery in South African gold production ahead? The short answer is that, barring a huge gold price increase, the country’s gold output will likely continue to decline at a rapid rate.

South Africa has some of the world’s highest cost producing gold mines – a recent estimate has suggested that at current gold prices around half the industry is operating at a loss – and this would suggest that gold production could continue to decrease at an escalating rate as companies will no longer be able to afford to keep unprofitable mines and shafts open.

Add to this the pressures on the companies from massive wage demands brought on by mining union competition for membership between the NUM and AMCU, and this is a recipe for the potential annihilation of the country’s gold mining sector in its current form.

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