Africa-Press – South-Africa. The presence of South Africa’s gold miners in the global gold mining industry has shrunk in recent decades, and the sector is now too small to significantly benefit from high prices – but severely impacted by low prices.
This is according to mining analyst Peter Major, who told Business Day TV that gold price fluctuations did not significantly impact the local gold mining industry just a few decades ago.
He explained that South Africa had excellent deposits and the lowest costs and was the world’s most efficient and largest gold producer.
Therefore, low gold prices, as seen in the 1970s and 1990s, did not really affect the local gold mining industry.
“When we saw low prices for minerals, we used to kind of be happy because we knew that would preclude our competitors from building more mines because we were always the lowest-cost producer,” Major said.
“We were very much the most efficient producer, and most of all, we were the largest producer by far. ”
However, this has since shifted, and South Africa is now a very small player in the global gold mining industry.
“What we do in gold makes no difference in the world. We don’t even produce 3%,” Major said.
Therefore, South Africa has become a price taker, and fluctuations in gold prices have a significant impact on local gold miners’ profitability.
Luckily, the gold price has experienced strong growth over the past two years and hit an all-time high of $2,390 per ounce on Thursday, 12 April 2024.
Gold has been over $2,000 an ounce for the past four years.
While this price has benefitted South Africa, the country’s gold production is so small that the benefit has been limited.
“We’re producing not even 15% of what we produced for decades and decades,” Major said.
This is despite a recent uptick in mining production recorded in February of this year, which showed gold production growing by 25%.
However, Major explained that this is because December and January provided a low base due to the holidays.
“If you look at the last three months compared to the previous three months, our gold production was actually down 2%, and that’s more of an understandable and realistic number,” he said.
Down 85% over 30 years
Minerals Council of South Africa chief economist Hugo Pienaar at the Mining Indaba revealed earlier this year that gold mining output has declined by over 80% over the past three decades.
Pienaar explained that mining was not only the backbone of South Africa’s economy in the past but still matters today.
The sector employs over 477,000 South Africans and pays the government over R140 billion in tax and royalties annually.
South Africa’s total mining output has decreased by 13% since 1994. However, excluding gold, production has increased by 65% over the past three decades.
This is because gold production has dropped significantly over the past few decades – by as much as 85.5%.
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