Gold?is still red hot

2014-05-11 15:01

Gold mining in SA is experiencing somewhat of a resurgence, but for how long?

The South African gold mining industry seems to have stalled – for now – its almost uninterrupted downward spiral since 1970.

Last year, the industry produced almost the same amount of gold as a year earlier – a shockingly rare feat last seen in 2002.

After having been the world’s largest gold-producing country for decades up to 2006, South Africa has been relegated to fifth place, with Peru coming in a close sixth.

Production last year was roughly 168 tons, less than half the 2004 figure of 342 tons, but practically the same as in 2012.

Employment has understandably declined over the same decade, but far more slowly, from 180?000 in 2004 to about 123?000, including contractors, last year.

But the latest operational results from major local gold mining companies show that gold production in the first quarter this year was possibly even better than last year.

Harmony Gold this week reported a year-on-year increase in gold production at its local mines. In the first quarter, production was 7?552kg as opposed to 7?108kg a year earlier.

Sibanye Gold recently did the same, producing 10?338kg in the first quarter this year against 9?312kg a year earlier.

The last of the three major local gold companies, AngloGold Ashanti, is due to report its first-quarter numbers later this month.

Gold Fields this week announced bad news for its lone local asset, the mechanised South Deep.

Getting the mine to break even was going to take more time, the company announced. At the moment, the mine is producing gold at a lossmaking total all-in cost and is still considered a development project.

South Deep is suffering from a lack of a “mechanised mining culture” and “suboptimal mechanised mining skills” in South Africa, according to the company.

To help out, Gold Fields has imported a team of Australian mechanised mining specialists.

Gold Fields still promises that South Deep will eventually produce 700?000 ounces (almost 20 tons) of gold a year at a remarkably low all-in cost of $900 (R9?324) an ounce.

That would double the mine’s current output.

At the company’s old mines now operated by Sibanye, the all-in cost is currently about $1?000.

In terms of profitability, Harmony’s mines produced gold at an average all-in cost of R434?202/kg, while it sold gold for an average of R450?528/kg.

At Sibanye, the all-in costs averaged only R365?187/kg in the quarter – far lower than a year earlier.

The company has recently indicated it is waiting in the wings for Anglo American Platinum’s (Amplats’) threatened divestment from some of its Rustenburg platinum mines.

Last year, the gold mines concluded wage negotiations with the National Union of Mineworkers (NUM) despite a legal challenge from the Association of Mineworkers and Construction Union (Amcu).

Amcu is the recognised majority union at a number of key gold mines, but is a minority union if all the gold mines are combined.

This is the nub of a labour court case where Amcu is asking for the right to strike and, in essence, break up the Chamber of Mines’ bargaining forum. The case has been postponed to next month.

That would allow the union to pursue a better wage deal at the mines it controls – and launch a protected strike.

The gold mines pay less than the platinum mines despite the work being more or less identical. After the wage deal, which was accepted by the NUM last year, entry-level gold miners receive roughly R5?400 as a basic salary and R9?339 in total, according to the Chamber of Mines.

That is the same as the entry-level workers at the lowest-paying platinum company, Amplats, before last year’s hikes are implemented.

The current wage talks include last year’s raise, which will be backdated.

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