South African gold production for the second quarter of 2008

Second quarter 2008 gold production

In the second quarter of 2008, South Africa’s total gold production increased by 9% to 56 933 kilograms when compared to the first quarter of 2008. On a year-on-year basis gold production was down by 10.4% in the second quarter illustrating the continued impact that the electricity supply curtailment has had on the sector. In the first quarter of 2008 production fell by 16.8% with the year-on-year decline in production started slowing in the second quarter.

Electricity emergency

The key reason for the year-on-year decline in gold production was the national electricity emergency that effectively closed the gold mining industry from 25 to 31 January 2008 and which then curtailed electricity supply to the gold mining sector to 90% of normal usage. The curtailment of electricity supply to 90% proved to be exceptionally challenging for the industry and d uring March 2008 some mines were able to, by application, get back some supply to help stabilise operations. The approval of extra electricity supply, above the 90% level, was then granted to some mines on a case-by-case basis. There was no blanket increase in electricity supply to 95%.

 Need for other electricity users to save more

Since the start of the electricity emergency in January 2008, Eskom’s large 138 industrial customers have borne the brunt of the electricity savings in the economy, to the extent that the electricity supply curtailment to these users has effectively bailed the country out of a potentially serious situation. The mining industry is seriously concerned about the fact that very few other sectors have achieved much savings, such that the burden still remains on mining and other large industrial customers. Given the substantial export earnings and employment intensity of mining, it is clear that this situation cannot continue indefinitely. Other users of electricity (government, parastatals, financial services, tourism, households, etc.) have to do more.

Chamber members' production

Production for gold mining members of the Chamber increased by 7.7% to 47 329.8 kilograms in the second quarter of 2008 when compared to the first quarter. The 8% recovery in tons milled more than offset the 0.3% decline in average grade, which helped increase production on a quarter-on-quarter basis. On a year-on-year basis Chamber member production fell by 12.9% in the second quarter of 2008, as the large increase in the usage of surface low-grade dumps increased the dilution rate through the mills with the result that the average grade recovered plunged by 14.3% in that quarter.

OFFICE OF THE CHIEF EXECUTIVE

For any enquiries please contact Roger Baxter, chief economist, on 011-498 7663