Karen Harverson
Gold mines serviced by Anglo must be rightsized if they are to survive, said chairman of Anglo American Corporation’s Gold and Uranium division Clem Sunter at the announcement of the quarterly results last week.
Rightsizing may involve reductions in the scale of operations at shafts, shaft closures, or both. It is only effected if there is nothing to sustain the operation in the long term, such as viable ore reserves, a realistic chance of getting costs under control, or a likely sustained rally in the gold price.
Sunter said the gold price was likely to remain in the R45 000/kg to R46 000/kg range for some time, which is why rightsizing must take place.
The company’s total gold production dropped from 56 599kg in the March quarter to 53 487kg in the June quarter this year. Profits fell almost 37 percent, largely as a result of its Freegold operation which reported an 8,5 percent decline in production, a loss of more than 2 000 kilograms.
Sunter said most mines had held steady in terms of production but Freegold Mine, a big marginal producer, was battling to sustain production levels.
He said while Anglo wanted to keep the mine going, the reality was that it was running out of gold.
The second phase of Freegold’s Freddies no 4 shaft including the sinking of the sub-shaft was due to begin in August after the completion of the main shaft but will be delayed until conditions improve, said Sunter.
Rationalisation is likely to occur in the second half of the year.
He commented that the gold division had bottomed out but said, with minimal public holidays in the remaining year, matters should improve and he expected a wage settlement to be reached despite the current deadlock.
Freegold, Vaal Reefs, Elandsrand and Ergo all reported a decline in gold produced, while Western Deeps’ production rose by 1,6 percent.
JCI Limited’s gold division again suffered heavy losses in its fourth quarter ending June with a fall in gold production of 7,8 percent, or 869kg compared to the third quarter ending March.
An improvement of 5,8 percent in the average gold price partially offset the effect of the reduced output but net profit after taxation fell 7,2 percent to R54,6- million compared to the previous quarter’s R58,8-
Speaking at the quarterly results this week, gold division chairman Bill Nairn commented that a drop in grade had been experienced at all of the group’s three mines, Randfontein Estates, Western Areas, and HJ Joel. He added that Western Areas grades had been good at 6,8g to 7g/t before a bad month in May dropped the yield to 6,6g/t. “However, we expect grades to remain in the 6,7 to 7g/t range.”
Despite an eight percent increase in milled throughput at HJ Joel, gold production was static, affected by lower grades which dropped the yield to 5,18g/t compared to the March quarter’s 5,64g/t.
Echoing Sunter’s belief that the gold price was unlikely to increase substantially, Nairn said the company was considering joining United States and Australian producers in long-term hedging.
“We may become involved in an aggressive hedging (forward selling) policy as we expect the rand/dollar exchange rate to worsen to R3,80 per dollar, a price we’re already easily attaining.”
JCI’s Chief executive John Brownrigg blamed the public holidays primarily for the decline in production, saying that in previous years’ public holidays, the mines had achieved at least 50 percent production due to employees volunteering for extra shifts. “However, this year, this was discontinued by employees and not only was production zero on the public holidays but it was as low as 35 percent on the days before and after the public holiday.”
He said the workforce at Randfontein had decreased by some 2 000 people. The rationalisation resulted from a scale down at the Cooke no 3 shaft. Protracted negotiations since February over the retrenchments caused absenteeism to rise by 12 percent. The retrenchment cost some R8-million.