With gold at $1220 60% of South African gold miners are losing money

Another week and another story about gold miners being hit very hard by the recent price drop. Last week we wrote about Australia and how with gold price around the $1220 mark, some 20% of Australia’s gold production is expected to go ‘off-line’ in the next 12 months:

Pat Scott, managing director of Mungana Goldmines, says gold’s current price will result in a 20 per cent fall in Australian gold production. Mines will be closed because their costs are too high for companies to make a profit, Scott says.

Australia’s Bureau of Resources and Energy Economics expects 252 tons of gold to be produced this year from the country’s mines. If Scott’s prediction is accurate, Australia will produce about 200 tons of gold next year if gold continues to hover around $US1,200 an ounce.

Well this week it seems it is the turn of South Africa – still one of the biggest gold miners on the planet . Reuters are reporting that with the gold price at these levels (around £1220) a staggering 60% of gold miners are losing money:

According to Roger Baxter, chief economist at South Africa’s Chamber of Mines, in the fourth quarter of 2012 the price of gold averaged 509,000 rand per kilogramme, but it fell in the first six months of this year to under 400,000 rand/kg….

…“At a 400,000 rand [around $1220 an ounce] a kilo gold price, our estimate is that about 60 percent of the industry is in loss-making territory.

Leading to more job cuts in an industry that has already seen more than two thirds of employees laid-off since 1990:

The industry has shed 340,000 jobs since 1990, more than two thirds, and there are fears of further big lay-offs as militancy among workers steps up ahead of tough wage talks this month.

Further job losses are an inevitability, and these are linked to falling commodity prices, but long-term labour instability could act as additional downward pressure on the sector,” said political analyst Nic Borain.

Which means that even during the bull run, gold miners in SA were cutting jobs:

Ominously, even during gold’s bull run over the past decade, South African producers shed jobs almost every year, according to government data.

The number of miners employed in the gold shafts fell to 142,000 last year from almost 500,000 in 1990.

And the reason isn’t just because of a falling gold price, it’s also because of huge rises in the cost of getting it out of the ground in the first place:

South Africa’s gold mines were able to earn tidy profits in 2008 and 2009 when gold was $1,000/oz, but costs – notably labour and power – have ballooned. In the fourth quarter of 2009 for example AngloGold Ashanti’s cash costs in southern Africa were $575/oz, but by the same period last year its cash costs in South Africa had doubled to $1,166/oz.

It would seem that the gold story of 2013, which has been dominated by talk about ‘the price’ so far, is about to change and peoples focus is going to turn to just how many mines are stopping production.


Link to this article: : http://www.goldmadesimplenews.com/mining/with-gold-at-1220-60-of-south-african-gold-miners-are-losing-money-11157/

Posted by on Jul 8 2013. Filed under Mining. You can follow any responses to this entry through the RSS 2.0. You can skip to the end and leave a response. Pinging is currently not allowed.

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