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A Strategic Review of the South African Gold Mining Industry
Frost & Sullivan, Dec 2008, Pages: 132
This Frost & Sullivan research service titled South African Gold Mining Industry provides a holistic and impartial view of the global gold demand and supply trends. It also examines South Africa’s gold production trends, prices, market drivers as well as challenges and restraints being faced by the industry.
Market Overview
South African Gold Mining Industry to Rebound from 2010
The South African gold mining industry, which has been in existence for the past 120 years is now in a mature and declining stage. South Africa’s gold production in 2007 was just a quarter of the 1000 metric tonnes that the country produced in 1970. The country’s gold production has been declining for the past seven years due to increased operating cost pressures, deep-level mining, safety challenges and electricity shortages. South Africa’s gold production is expected to continue declining up to 2010, after which, it is likely to be on the growth path again. The country’s electricity supply situation is set to improve significantly in 2010 following the commissioning of three coal-fired power stations. This will provide a fillip to market prospects.
Following the first discovery of gold in the Witwatersrand Basin in 1886, South Africa has built a strong and well-diversified mining industry that is predicated on an excellent road and railway network, a modern regulatory framework and a robust supporting industries cluster. The gold mining sector is the second largest sector in the country’s entire mining industry that employed 140, 000 people in 2007 and generated R23 billion worth of merchandise exports in 2007. The South African gold mining industry probably constitutes one of the most successful clusters, if downstream and upstream activities are considered. The thriving mining consumable supplies sector, mining equipment supplies sector, abrasives and chemical supplies sectors are all predicated on a robust gold mining industry. The South African government’s focus on jewellery fabrication industry as a growth opportunity area in the mining industry will provide a further boost to the gold mining industry.
Focus to be on Improving Operational Efficiencies and Containing Costs
“Despite facing a host of challenges, South Africa’s gold mining industry has maintained its pole position in the global gold mining industry,” notes the analyst of this research. “At 254 metric tonnes of gold produced in 2007, South Africa is the world’s second largest gold producer after China.” The rising price of gold on international markets, state-of-the-art processing and refining plants and the transformation of the South African gold mining industry will continue to be key drivers of growth going forward. The remaining deep-level gold deposits in the Witwatersrand gold basin of South Africa will continue to attract the attention of explorers and investors, given the rising gold prices and the technological breakthroughs that are minimising operating costs.
“The South African government’s renewed focus on mine safety, declining ore grades, electricity shortages, skills shortages, increased operating cost pressures and a difficult labour environment will result in further production cuts,” cautions the analyst. “Mining companies are likely to be concerned with sustaining current operations rather than opening up new mines.” South African gold mining companies should focus on improving operating efficiencies, cutting hedge books and containing costs at every level of their operations. Use of the latest technological breakthroughs in South Africa’s deep level mines will help contain costs.
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