-->Overview of the South African Gold Mining Industry

HOUSTON--December 24, 2004--Researched by Industrialinfo.com (Industrial Information Resources Incorporated; Houston, Texas). The South African mining industry, which began in 1886 with the discovery of reef gold-bearing conglomerate on the Langlaagte farm near Johannesburg, remains a very labor-intensive industry, even in today’s world of mechanization, when compared to Canada and Australia. The labor cost, when combined with other production costs makes the per unit cost of mining in South Africa higher than in its counterparts.

There is no doubt that the African nation of South Africa is endowed with the richest and most diverse concentrations of mineral resources on the earth, and leads the world and Africa as the most important mining country, in terms of the variety and quantity of minerals produced. It has the world’s largest reserves of chrome, gold, vanadium, manganese and PGM’s, and apart from diamonds (Australia, Botswana, Russia and the DRC), uranium (Niger), copper and cobalt (Zambia and the DRC) and phosphates (Morocco), South Africa is the leading producer for nearly all of Africa's metals and minerals production. The South African mining industry contributes to more than 25% of that country’s GDP, making it the one of strongest economies in Africa.

From 1887, when Cecil Rhodes founded Gold Fields of South Africa (GFSA), the first mining company, South Africa’s mining industry has been dynamic, with gold playing a major role. Until 1983, gold production accounted for over 50% of South African’s foreign exchange earnings. After a 30-year decline in gold production, 989 tons in 1970 to 395 tons in 2001, today gold contributes fewer than 20% of South Africa’s foreign exchange. At one time South African gold mines employed over 500,000 people, but today it employs 300,000. In 1990, there were 34 major gold mines; today there are fewer than 20 significant mines. In spite of all, South Africa’s economy has continued to thrive partly because of its diverse mineral production, where gold plays a much smaller role in the economy.

In spite of the decline in gold production and a weak global economy, South Africa is still the world’s largest producer, with 450 tonnes (14.5 million ounces) in 1999. Gold was still the star performer among the minerals in 2002, South African’s total gold sales actually increased by 42.7 percent. The decline in gold production has not been attributed to a depletion of resources, but has been attributed by industry insiders to low gold price coupled with high labor cost, a weak rand, and high domestic inflation, which all together made it more expensive to mine gold in South Africa than elsewhere.

Domestic and foreign mining companies have committed more than $10 billion for new mineral expansion and upgrade project development for the period between 2000-2007. With a strong rand-dollar exchange rate, many of these projects could be reevaluated and more added. Reports by the South Africa Department of Minerals and Energy indicate that in 2001, South Africa produced more than 55 different mineral commodities from 749 mines and quarries. However, as of 2003, there are 90 diamond mines, 57 coal mines, 33 gold mines, 20 chrome mines, 17 PGM’s, and 561 other mineral mines. The primary drive behind the increase has been growth in the PGM’s sector. Production at the PGM mines has grown by 4.8 percent when compared to the previous years.

The challenge for the South African mining industry in 1990 was to restructure itself, to take account of what was happening in gold mining around the world, where output was soaring, and to adapt to a fast-changing political landscape at home. The South African mining industry is entering a new and exciting era. It has the opportunity to deal with new challenges, not only to position itself in the cutting edge of the mining industry, but also to deal with HIV/AIDS epidemic.

The South African Minerals operates on a free enterprise market-driven basis. Prior to 2000, ownership of the mineral rights was held either by the government or private entities. Now, minerals rights belong to the state. In addition, new regulations aim to create greater black ownership in a white-dominated business, and generate more revenue for the government's coffers. The new mining charter states that black investors must own a minimum stake of 15% in all mining firms within five years, rising to 26% within a decade.

The Ministry of Mines and Energy’s Department of Minerals and Energy (DME) is responsible for establishing and implementing minerals and energy policy and for the oversight of the South Africa’s minerals industry. The Chamber of Mines of South Africa central spokesman for South African mining companies, in gold and other minerals, was formed in 1889, three years after the first gold bearing reef was found. Until the 1990s it also handled the recruiting of much of the workforce for the mines, and handled many general services from wage negotiation to hospitals for the mining industry.

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