End of The Gold Era? SA Gold Production Declines Further in 2012

End of The Gold Era? SA Gold Production Declines Further in 2012

Last year was a rough one for South Africa’s gold mining industry. In addition to over a dozen of its major gold mining companies being affected by widespread wildcat strikes, the World Gold Council reports that, along with Indonesia, the country saw the largest absolute declines in production in 2012.

But unofficial industrial action isn’t the only factor playing a role in South Africa’s dwindling contributions to the world’s gold supply. The ground there is nowhere near as laden with the yellow metal as it once was, and the country that produced 67.7 percent of the world’s newly mined gold as recently as 1970 can now only account for less than 7 percent.

Is South Africa’s gold mining industry slipping off into a slow senescence, or does hope still remain for the country that once had the Midas touch?

Cautious Optimism Going Forward

South Africa hasn’t seen a positive change in gold production since 2003.

“We’ve seen many of the top ten gold producers declining in recent years,” said Sven Lunsche, spokesperson for Johannesburg-based mining company Gold Fields,”and certainly the largest declines are in South Africa, in deep level mines.”

Gold Fields, one of the biggest players in the South African gold mining scene, saw its gold production fall by 226,000 ounces in 2012. However, Lunsche said that 145,000 of those lost ounces could be attributed to the strikes, and 30,000 to a fire at the KDC mine — one of their most productive. That leaves only 51,000 ounces lost due to depleted deposits in the ground.  If a Johannesburg court recognizes the class action lawsuit filed against it and other gold mining companies by thousands of miners who claim to have contracted lung diseases from dust in the mines, the company could be facing more significant losses than the price of a couple hundred thousand ounces of gold.

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Despite shrinking statistics, Gold Fields still remains optimistic about the future output levels of its mines. It recently installed a newly renovated infrastructure in its South Deep mine that will allow it to ramp up production to 700,000 ounces a year starting in 2016. The company expects the renovations to lengthen the mine’s lifespan by 60 years, and anticipates annual yields in the hundreds of thousands for the first few decades of this new life.

The Production Cliff

South Africa’s worsening dearth of yellow metal lodes reflects a larger trend in world gold production. Many experts, including those at Gold Fields, have warned of an impending gold ‘production cliff’ in the coming years. In January, at a mining conference in Vancouver, Pierre Lassonde — chairman of the Franco-Nevada Corporation — implored constituents of the gold mining industry to address this problem that he claimed is right around the corner. It could rear its lusterless head as soon as 2017.