SOUTH AFRICAN GOLD PRODUCTION FOR THE FIRST QUARTER OF 2008

In the first quarter of 2008, South Africa’s gold production fell by 15.6% to 52 228 kilograms when compared to the fourth quarter of 2007. On a year-on-year basis the rate of decline in gold production was 16.8% in the first quarter of 2008.

The electricity eEmergency

The key reason for the large drop in gold production was the national electricity emergency that effectively closed the gold mining industry from 25 to 31 January 2008. From the beginning of February the gold mines faced a curtailment of electricity supply to 90% and this turned out to be exceptionally challenging for the industry. Given the strong relationship between electricity usage and mining production, the Chamber had warned that a 15% to 20% decline in production was probable given the curtailment in electricity supply .

During March it became clear that some mines were experiencing difficulties in operating at 90% of their normal electricity supply. If this situation persisted it could compel the affected mines to close parts of their operations resulting in job losses. The Chamber consequently engaged with Eskom to increase the electricity supply to the affected mines to allow operations to continue. The supply of electricity to these mines was increased from 14 March. The approval of extra electricity supply, above the 90% level was then granted to some mines on a case-by-case basis. There was not a blanket increase in electricity supply to 95%.

The gold mining industry accounted for R40- billion or 7.5% of South Africa’s merchandise exports and employed 168 860 employees or 34% of total mining employment in 2007. The Chamber believes that it is vital that the events of late January 2008 are not repeated, where a significant component of the country’s exports and employment was shut down. Rather, a more strategic approach to managing the electricity challenge is required, including ensuring that tightness in the electricity market is handled better in future and that all electricity users become more energy efficient.

For gold mines members of the Chamber, production declined by 17.2% to 43 941 kilograms in the first quarter of 2008 when compared to the fourth quarter 2007. The 11.5% decline in tons milled plus 6.4% decline in average grade led to the fall in production. On a year-on-year basis Chamber member production fell by 19.3% in the first quarter of 2008, as the 3.5% decline in tons processed through the mills was insufficient to compensate for the 16.4% decline in the average grade recovered.

OFFICE OF THE CHIEF EXECUTIVE

For enquiries related to this media statement please contact Roger Baxter, chief economist, on 011-498 7663