With the yellow metal steadily losing its sheen, South African gold producers are looking towards an otherwise bemoaned feature of the economy to shore up their losses: the country's flailing currency.
The gold price made headlines in April, plummeting to its greatest lows in 30 years and losing $200 an ounce in only two days. It grabbed attention for a second time this week, trading at its lowest price since 1982, touching lows of $1 180 an ounce.
But mining companies say the blow has been softened by the weakening rand, which has devalued significantly over the same period. At the end of May, the currency slid past the R10 to the dollar mark.
On June 11, it reached a four-year low of R10.36. Catalysts for the fall were ongoing labour tension and violence in the mining sector, investors peddling government bonds, lagging manufacturing figures, lower than expected gross domestic product growth, a struggling export market and a widening current account deficit.
In dollars per ounce, the gold price had dropped 24.39% from the beginning of the year to the afternoon of July 3, according to information aggregated by gold24.com. Over the same period of time, the rand price per ounce decreased by 11.4%.
Over the past year, the dollar gold price has decreased by 21.48%, whereas the rand gold price per ounce decreased by a comparatively small 4.58%.
Totally South African
"It's a bit of a red herring, the whole gold price issue," said James Wellsted, senior vice-president of corporate affairs at Sibanye Gold.
Late last year, parent company Gold Fields unbundled its South African assets.
"We're a totally South African company, so our costs are virtually all rand based — any dollar-based price gets converted to the rand price. It has offset some of the drop to some extent."
Henrika Basterfield, investor relations manager at the Harmony Gold Mining Company, agreed.
"Ninety-three percent of our production actually comes from South Africa," she said.
"The rand per kilogram of gold price is more relevant to us. It actually held better." The company had fared better in comparison to some of its international peers "who are more exposed to the dollar price directly," Basterfield said.
The gold price
Alan Fine, spokesperson for AngloGold Ashanti, was more restrained in his appraisal. Although the rand fall was less than the dollar fall, it was still significant, he said.
The gold price had fallen by about one-third — from highs of about $1 900 an ounce in September 2011 to its current levels of $1 245 an ounce on July 3, he said.
The rand gold price had fallen from a high of about R500 000 a kilogram to R403 640, a drop of almost 20%.
"So, yes, the fall of the rand has mitigated it to some extent, but only partly," said Fine.
For several of the mines, the price has now fallen to dollar levels that are lower than what was planned to maintain production levels.
In April, Harmony Gold told the Mail & Guardian that it had planned for a price of $1 251 an ounce. Sibanye Gold had worked on an estimate of $1 350. But the mines said the planned dollar-ounce rate was not as relevant as the planned rand per kilogram rate or the planned notional cash expenditure.
Next financial year
In May, Harmony announced that it planned for a R400 000 a kilogram rate for the 2014 financial year, whereas Sibanye had projected conservative notional cash expenditure levels and managed to undershoot them in the past financial year, said Wellsted.
Nevertheless, all three mines agreed that the price constraint was a cause for concern, especially in a "price-taking" industry that is facing significant pressures from wage negotiations that will begin this week.
The National Union of Mineworkers has demanded pay increases of up to 61% for some of its workers. Its rival, the Association of Mining and Construction Union, has called for 100% increases for lower-level workers.
Deputy President Kgalema Motlanthe recently oversaw the development of a framework for peace and sustainability in the industry. While all parties ostensibly bought into the agreement, Amcu bucked expectations by refusing to sign it on July 3, perpetuating uncertainty in the sector.
Therefore, the price drop called for cost-cutting, something which all three mines have prioritised.
"Obviously the impact of the lower gold price on producers is marked," said Fine. "It only underscores the need to press ahead with cost-cutting measures, something we have been doing with urgency for much of the year."
As part of these efforts, AngloGold Ashanti will delay the production of its Mongbwalu mine in the Democratic Republic of Congo and has put its Namibian assets up for sale.
Harmony has outlined intentions to save R400-million in corporate services by renegotiating contracts and announced this week the opportunity for workers to apply for voluntary termination.
Sibanye, said Wellsted, had been undergoing a review process since its unbundling.
It is expected that the review will be presented by the end of the third quarter this year.
"The drop in gold price has obviously been concerning but we can only manage what we can manage, which is our operations," he said.