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LAWRIE WILLIAMS: How the mighty are fallen. RSA gold on the decline

There is the news this week that South Africa’s gold production volume has been falling for eight months in a row year-on year with a 16.2% decline in May compared with the same month in 2017.  South Africa was for many years the World’s No.1 producer of the yellow metal by far hitting around 1,000 tonnes in 1970 before it started to decline.  Quite how dominant South African production was then is demonstrated by the fact that China, currently the world’s largest producer, can only manage around less than half this annual production  tonnage.  South Africa now only ranks 7th in the world gold production league, and could well be struggling to hold this position if a decline of thie May level is repeated throughout the year. Last year it was overtaken by Canada and Peru in terms of total gold output.

Top 10 Gold Producing Nations 2016/2017 (Tonnes)

Rank

Country

2017 Output

20 16 Output

%  Change

1

China

429

464

-7.9%

2

Australia

289

288

+0.5%

3

Russia

272

253

+7.6%

4

USA

244

229

+6.3%

5

Canada

171

163

+5.0%

6

Peru

167

166

+0.3%

7

South Africa

157

163

-3.6%

8

Ghana

130

131

-0.8%

9

Mexico

122

128

-4.7%

10

Indonesia

114

109

+4.8%

Source: Metals Focus, lawrieongold

 South Africa was thus the world’s leading gold producer for most of the 20th Century – primarily from gold mined in the Witwatersrand basin centred around Johannesburg, and then from the Carletonville and Orange Free State gold fields from the same geological sequence.  The writer worked as a mining engineer in the South African gold mines in the 1960s as production was nearing its peak so has first-hand knowledge of the problems which faced the miners there. 

At that time some of the older properties were running out of payable gold ore, while others had to go deeper and deeper (over 2 miles down in some cases) to maintain output and this created both technical and logistical difficulties in terms of high rock stresses, high temperatures (the mere fact of moving ventilation air underground – adiabatic compression – raised the air temperature around 3 degrees celsius (5.38 degrees F) for every 1,000 feet of depth so for say a 10,000 ft deep mine the air temperature just through pumping the air down the temperature would be around 30 degrees C  higher than it was on surface, and some mines went even deeper! And rock temperatures also increase with depth.)  The excessive depths also added drastically to transportation costs for men, materials and ore hoisting.

Indeed to maintain a workable environment, the deeper operations needed to refrigerate the air being pumped underground, while workers needed to undergo acclimatisation training to prepare them for the high temperatures and humidity they were likely to encounter at the workface.

All this may have put South African mining at the forefront of technology, but despite a huge emphasis on maintaining safety the fatal accident rate still seemed unacceptably high (any fatality is deemed unacceptable) .  Miners needed to work at depths where rock stresses and behaviour could be unpredictable leading to unforeseen seismic events – some of which proved fatal to those in the vicinity. 

Safety is relative though.  In terms of the huge sizes of the mine workforces – some   the biggest mines employed perhaps 5,000 people and the industry overall at its peak nearly half a million  – per capita fatality rates were no higher than in some Western mining operations, but were still unacceptably elevated and as time progressed and the world overall became more safety conscious work stoppages due to safety investigations following fatalities, made maintaining production ever more precarious.  Gold grades still are higher than in many other countries, but the overall costs of mining and milling the gold ore have made most South African mines marginal at best.

South African mining is thus something of a microcosm of the mining industry as a whole.  Reserves and resources are finite and mostly depleting.  Globally, few major gold deposits have been found in recent years and/or remain undeveloped.  Ore grades have been diminishing and while there are a few countries which may still be increasing gold output even these are peaking while others, like South Africa, are in an ever-increasing decline.  Whether ‘peak gold is actually with us or not is arguable, but even if it is not it is very close and any global annual increase from now on is likely to be insignificant/  Effectively peak gold is with us and as long as demand in countries like China continues to increase as the middle class expands, then the gold supply/demand balance will come under pressure.  In the long term gold has to benefit!

14 Jul 2018

About the author

Lawrence Williams

Lawrence (Lawrie) Williams is a well known London-based writer and commentator on financial and political subjects, but specialising in precious metals news and commentary. He is a qualified and experienced mining engineer having graduated in mining engineering from The Royal School of Mines, a constituent college of Imperial College, London – recently described as the World’s No. 2 University (after MIT).

e: lawrie.williams@sharpspixley.com

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