News / South Africa

Aarti Bhana
3 minute read
18 Jan 2018
7:00 am

Only 39 years of gold left in SA

Aarti Bhana

As you dig deeper, you need a higher gold price.

In 39 years, finding gold in South Africa’s mine reserves might be an actual hunt for treasure. Stats SA recently announced that with the present production levels, there are only 39 years of accessible gold reserves remaining in SA mines.

This figure is much lower in comparison to South Africa’s platinum group metals (PGM) and coal reserves, according to Stats SA’s latest Environmental Economic Accounts Compendium. The country still has 335 years of PGM reserves and 256 years of coal reserves.
The mining sector is a major contributor to South Africa’s economy. However, the Chamber of Mines said in a recent report 2016 was a particularly “difficult year”.

In 2016, it contributed 7.3% to GDP, a 4.7% decline from 2015. SA is a top 10 producer globally of PGMs, gold, chromium and coal, but as time has passed, the production of gold, specifically out of South Africa’s share from the global basis, has declined, almost consistently, said the mining analyst at Stanlib, Kobus Nell. “South Africa has fallen quite a lot. Where it used to be [one of] the dominant commodities for export and resources, it has declined massively.”

Nell said the decline was a result of easy reserves being dug up in what are mineral-rich areas within South Africa. The deeper the mines go, the further the miner has to travel, which comes with additional costs and safety concerns.

Gold production levels have resulted in South African company cost structures skyrocketing. Nell said while mining companies were working towards reducing costs, many had battled more with structural change.

The life of a mine is very price dependent. A mineral study is conducted on a piece of land to determine how much gold there is, then a feasibility study is carried out to determine how much the gold should be sold for to make it economically viable. “As you dig deeper into the ground, you need a higher gold price to make those resources economical. If there isn’t a [favourable] gold price, those resources can’t be mined economically.

In that scenario, if you mine them, you are going to lose money, Nell said. Reserves are converted into the real price of gold today to determine the life of a mine. Sibanye-Stillwater, a precious metal mining company in SA, said it recently restructured some of its gold operations, resulting in the closure of the Cooke 1-3 mines. Sibanye Gold’s production in 2016 was 1.51 million ounces. The forecast for 2017 is between 1.35 million and 1.38 million ounces.

Senior vice-president at Sibanye-Stillwater James Wellsted said the decline in production was linked to the specific operational decisions the company made in 2017. “We continue to try and manage costs in order to ensure the sustainability of the operations. Given the inflation increases in wages (appr ox i m at e l y 50% of operating costs) and electricity prices (approximately 20% of operating costs), this has been a challenge,” he said.

Wellsted added that when Sibanye-Stillwater spun out of Gold Fields in 2013 and restructured the business, through cost-cutting and productivity measures for sustainability, it was able to increase its available reserves from about 13.5 million ounces to 17.9 million ounces. He added that the company continued to invest capital to extend the lives of operations in South Africa.


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