Monthly gold production reached a new monthly low in January, according to data released by Stats SA1. Although a number of temporary factors might have contributed to the unusually low level, general historical trends show that gold has lost the prominent place it once had in the South African economy.
Stats SA has published comparable mining production indices that go back as far as January 1980, for the industry as a whole as well as for various minerals, including gold, iron, platinum and coal. The indices provide an indication of the level of production, set against a particular base period. Currently, the index has been set to 100 for the base period of 2010.
Historical values of the gold index show the extent of how production has fallen. In January 1980, the index was 359,0, while the volume of gold produced was far lower in January 2015, resulting in the low index of 48,4. In other words, South Africa produced 87% less gold in January 2015 compared with the same month in 1980. Figure 1 shows how the monthly gold production index has fallen. What is not shown in the graph, however, is that production started on its downward trend well before January 1980.
Figure 1: Monthly gold production index, 1980-2015 (Base: 2010=100)
The fall in production has reduced gold’s contribution to the South African economy. The metal contributed 3,8% to gross domestic product in 1993, falling to 1,7% in 20132. In terms of sales, gold made up 67,0% of all mineral sales in 1980, falling to 12,5% in 2014. Coal currently leads the pack, having contributed 27,0% of total mineral sales in 2014.
South Africa has also fallen in global gold production rankings. Prior to 2007, the country held the number one spot as the top gold producer in the world, according to the U.S. Geological Survey Mineral Resources Program3. By 2014, South Africa had dropped to sixth place, according to Thomson Reuters GFMS4, falling behind other countries such as Peru, USA, Australia, and Russia. China is currently the world’s top gold producer.
So with the waning importance of gold to South Africa, does the future hold any promise for the industry? One estimate suggests that the country will soon need to look beyond the precious metal as a major resource. Stats SA’s 2014 Environmental Economic Accounts Compendium5 provides 2011 estimates on depletion rates for various minerals. At current production levels, South Africa will exhaust its coal resources in 119 years, and platinum in 218 years. For gold, resources will be exhausted in only 33 years. An update to the Compendium is due for release before the end of this month, containing new depletion estimates, but if this estimate holds true, many South Africans alive today will see the country taking on a much reduced role on the global gold mining stage.
1 Download the Mining: Production and sales publication here.
2 Download the Gross domestic product, 3rd quarter 2014 publication here.
3 Download U.S. Geological Survey Mineral Resources Program: World gold production for 2006 & 2007 here.
5 Download the Environmental Economic Accounts Compendium here.
Photo: Anglogold Ashanti, http://www.mediaclubsouthafrica.com