OWN CORRESPONDENT and REUTERS, Johannesburg | Tuesday
SOUTH Africa, the world’s biggest gold producing country for the past century, faces the prospect of losing its No 1 status by the end of the decade – and a new report suggests that only two of the country’s ageing gold mines will survive beyond 2025.
The Department of Minerals and Energy has forecast output to fall to 300 tonnes by 2010, down from last year’s 449.5 tonnes, its lowest for almost 50 years, and a peak of 1000 tonnes in 1970.
Some executives have warned that the industry is not producing gold at replacement levels and global real reserves were probably smaller than most assessments.
“It is going to dawn on everybody some time in the next two or three years that the world is actually going to start running out of reserves…,” Gold Fields Chairman Chris Thompson told an Australian mining conference this week.
Gold’s fading lustre has forced South Africa’s deep and mature gold mines to close unprofitable shafts and slash jobs.
The recent rand weakness has helped the bottom lines of South African producers, who earn dollars for their gold but pay costs in local currency. However, the consolidation is expected to continue this year.
AngloGold Chief Executive Bobby Godsell said recently that a wave of consolidation worldwide would leave between three and five dominant industry players. At the start of this year there were 12 firms producing more than a million ounces annually.
AngloGold and Gold Fields have launched ambitious plans to diversify outside of South Africa and moved north into the rest of Africa, buying projects with half the production costs of some of their South African operations. They are also eyeing expansion into North and South America and Australia.
But the South African government sent shockwaves through the industry this week when it blocked Gold Fields’ proposed $3.7bn merger with Canada’s Franco-Nevada, saying it would erode the country’s mining tax base because the new company planned to shift its main stock listing to Toronto.
AngloGold has said it would be interested in Australia’s Normandy Mining, and earlier this month was a rumoured merger candidate with Canada’s Placer Dome.
AngloGold is also considered a potential suitor for Ashanti from which it bought a 50% stake in Tanzania’s Geita mine for $205m.
Ashanti was forced to auction off Geita in a bid to survive a financial crisis sparked by last year’s bullion rally which flipped its gold hedging book into a loss of $570m.