Major South African gold producers fly into the danger zone – by Lawrie Williams ( – August 18, 2015)

Many of South Africa’s major gold mines will be making losses on an AISC basis at current gold prices and it is hard to see the industry recovering much failing a major bullion price increase.

LONDON -A few months ago, Mineweb published a thought-provoking article suggesting the South African Gold Mining industry as we know it might not survive beyond the end of the decade (See: Could SA’s gold mining industry be gone by 2020?).

In it Patrick Cairns reported on a talk by Peter Major, mining specialist at Cadiz Corporate Solutions, to JSE’s Power Hour in Cape Town, where he laid bare the serious problems facing the industry which have almost brought it to its knees. The current gold price is now around, or below, many of the miners’ latest AISC guidance levels and if the forecasts of most mainstream analysts are to be believed – the future of the industry looks bleak.

Major’s talk pointed to numerous political and union-related changes that have already seen the industry reduce to a fraction of the size it was only a decade or so ago. And unless there is a major pick-up in the gold price there would seem to be little prospect of any recovery. A combination of further falling prices and the implementation of a higher wage agreement will undoubtedly result in more closures and/or fewer jobs.

As Major pointed out, issues like government interference, the power of and conflict between unions, and BEE legislation, have all contributed to a situation where domestic gold mine productivity has dipped dramatically, and all this in the face of a declining gold price over the past four years.

While the fall in the value of the South African Rand against the US dollar has helped mitigate potential earnings losses (gold sales are in dollars while most local costs, particularly labour, are in Rands), the miners are, without exception, on the brink with respect to their South African production.

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