South African gold on final deathwatch

BUSINESS >> FINANCE >>   South African gold on final deathwatch






South African gold on final deathwatch

market & company data, compiled by Barry Sergeant

Technical Analysis of the markets

Technical Analysis of the markets

Click images to enlarge.

South Africa's gold industry is on final
deathwatch, despite claims of massive
existing below-ground reserves. Chris
Hartnady, research

South African gold on final deathwatch as top grade scientist finds
residual gold is more than 90% less than claimed

The apparent bottom line in a paper published in the South African
Journal of Science is that South Africa's gold industry is on final
deathwatch, despite claims of massive existing below-ground reserves.
Chris Hartnady, research and technical director of Cape Town earth
sciences consultancy Umvoto Africa, has found that South Africa's
Witwatersrand goldfields are around 95% exhausted, and anticipates
that production rates should fall permanently below 100 tonnes a year
within the coming decade.

IGNOMINIOUS END TO GLORY DAYS

Research shows that production rates should fall permanently below 100
tonnes a year within the coming decade

Author: Barry Sergeant
Posted: Monday , 16 Nov 2009
JOHANNESBURG -

Gold production from the Witwatersrand, the biggest known gold field in
the world, peaked at around 1,000 tonnes in 1970 and has declined ever
since. Hartnady says that while initially (1970-1975) the decline was
“quite precipitous”, it has been interrupted by only short periods of slight
trend reversal (1982-1984 and 1992-1993).

Leon Esterhuizen, a London-based specialist analyst at RBC Capital
Markets, has reacted to the research by saying that “South African gold
is dying — this is not new news”, but adds “that it may be dying faster
than we currently believe is novel”. On the levels of reserves, Hartnady
finds that the South African “residual gold reserve” after production
through 2007 is only 2 948 tonnes, a little less than three times the 1970
production figure, and much less than 10% of the officially cited
reserve.

The country's gold reserves are less than half of the current United
States Geological Survey (USGS) estimate of 6 000 tonnes, and the
country is not first, but fourth in world rankings, after Australia (5,000
tonnes), Peru (3,500 tonnes) and Russia (3,000 tonnes), Hartnady's
research shows. The USGS currently cites South Africa's gold reserves at
around 6,000 tonnes, while SA claims a 36,000 tonnes reserve base
figure (or about 40% of the global total). Hartnady's findings are based
onChamber of Mines figures and mathematical modeling pioneered by
the distinguished American geologist M. King Hubbert.

Esterhuizen comments that “most recent indications from Harmony (even
with gold bullion at new dollar records over USD 1,100/oz) is that its old
shafts – effectively the Free State gold field – are dying. DRDGold has
got Blyvooruitzicht on life support and is trying to get permission to keep
the plug in for a little bit longer (with everything around Blyvooruitzicht
now having been shut down), while Pamodzi Gold's demise and Simmer &
Jack's failure at Buffelsfontein just proves the point — all of this, at
record gold prices in rand terms”.

Analysts have also expressed surprise, if not amazement, about recent
comments from AngloGold Ashanti CEO Mark Cutifani to the effect that
its South African operations will be restructured. How is it, analysts ask,
that “the highest margin operating gold assets in South Africa are . . .
being re-structured ?”

A growing number of skeptics are also asking whether Gold Fields's
developingSouth Deep operation – which it bought in 2007 for USD 3bn –
will truly ever be able to make money. It is already evident that it will
probably never deliver a real return on the capital that it took to bring it
to life, says Esterhuizen. He also notes particular current promises by
both Gold Fields and Harmony of growth from the South African base
over the next three years.

Hartnady's prognosis is pretty grim: “Given the energy and
environmental problems associated with ongoing groundwater control,
water-resource contamination by acid mine drainage, and the possibility
of widespread mercury and other factors of pollution caused by illicit
underground ore-processing by the zama-zamas (illegal miners), the
glory days of South African gold mining appear to have arrived finally at
an ignominious end.

“There can be no further illusions, maintained by unrealistic expectation
of a future fortune, about the seriousness of the present situation. In
their various possible forms, the slow-onset disasters of environmental
degradation associated with the death-throes of a formerly illustrious
industry now pose a serious threat, and may ultimately cost far more
than the net present value of some 3,000 tonnes of gold”.
Esterhuizen mentions a number of other challenges faced by South
African gold diggers: royalties (a new thing), zooming electricity charges,
BEE (black economic empowerment) burdens, safety shutdowns,
“massive security costs”, and ever-present currency exchange control.
In these areas, Esterhuizen argues that “government may achieve a
‘small' miracle or, more likely, simply hasten the end”.

Esterhuizen says that “a small opportunity may be the possible stronger
future uranium market — effectively reducing gold costs by obtaining
revenue from by-products”. This is already happening at a number of
gold mines where uranium is also produced. Certain closed shafts known
to hold good quantities of uranium are also being investigated for
possible recommissioning.

Selected gold stocks active in Africa

Stock From From Value
price high* low* USD bn
South Africa & beyond
AngloGold Ashanti USD 44.70 -4.0% 234.3% 16.185
Gold Fields ZAR 108.67 -13.1% 90.6% 11.037
Harmony ZAR 79.24 -40.4% 27.8% 4.560
South Africa focus
Simmer & Jack ZAR 2.02 -43.4% 30.3% 0.333
First Uranium CAD 2.35 -70.6% 83.6% 0.374
DRDGold ZAR 3.54 -62.9% 23.8% 0.182
Wits Gold ZAR 91.00 -7.1% 226.8% 0.343
Gold One AUD 0.35 -64.3% 250.0% 0.263
Central Rand ZAR 2.00 -75.0% 5.3% 0.067
Pan African GBP 0.08 -10.1% 313.3% 0.182
Pamodzi Gold Suspended
Mintails AUD 0.05 -47.8% 123.8% 0.042
West Wits Mining AUD 0.13 -13.8% 290.6% 0.014
Global & Africa
Barrick USD 42.89 -2.6% 114.0% 42.159
Newmont USD 50.99 -1.9% 140.9% 24.496
Iamgold USD 18.42 -1.8% 584.8% 6.779
West Africa
Goldstone Resources GBP 0.02 -49.2% 350.0% 0.003
Avnel Gold CAD 0.15 -48.3% 650.0% 0.012
Medoro Resources CAD 0.58 -38.3% 1833.3% 0.107
African Aura CAD 1.14 -18.6% 1325.0% 0.058
Randgold Resources USD 80.88 -0.9% 210.1% 7.244
Red Back CAD 15.14 -5.8% 330.1% 3.334
Moydow Mines CAD 0.79 -10.2% 1480.0% 0.046
African Gold Group CAD 0.65 -4.4% 2066.7% 0.040
Semafo CAD 4.15 -0.7% 388.2% 0.993
Golden Star USD 3.45 -11.8% 762.5% 0.779
Resolute Mining AUD 1.06 0.0% 190.4% 0.378
Nevsun Resources CAD 3.20 -10.9% 661.9% 0.427
Perseus Mining AUD 1.85 0.0% 829.6% 0.550
Etruscan Resources CAD 0.48 -29.1% 171.4% 0.072
Cluff Gold GBP 0.69 -14.6% 219.8% 0.135
Mineral Deposits AUD 1.05 -2.3% 275.0% 0.556
Keegan Resources USD 5.93 -14.4% 1436.3% 0.169
Searchgold Resources CAD 0.04 -20.0% 300.0% 0.006
Gryphon Minerals AUD 0.56 -5.9% 840.7% 0.091
Shield Mining AUD 0.15 -21.1% 733.3% 0.010
Adamus Resources AUD 0.48 -9.4% 380.0% 0.128
Orezone CAD 0.63 -16.0% 142.3% 0.032
Axmin CAD 0.13 -28.6% 316.7% 0.036
PMI Gold CAD 0.12 -23.3% 1050.0% 0.013
Azumah Resources AUD 0.28 -11.3% 587.5% 0.040
Pelangio CAD 0.62 -4.6% 2380.0% 0.064
Ampella Mining AUD 0.63 -8.1% 1353.5% 0.075
Castle Minerals AUD 0.27 -1.9% 194.4% 0.016
Volta Resources CAD 0.38 -20.0% 660.0% 0.019
North Atlantic Resources CAD 0.06 -62.5% 200.0% 0.002
Avion Resources CAD 0.46 -5.2% 1037.5% 0.096
Signature Metals AUD 0.04 -29.1% 875.0% 0.028
Channel Resources CAD 0.08 -46.4% 650.0% 0.004
Riverstone Resources CAD 0.21 -48.1% 272.7% 0.010
Pan African
Africa West CAD 0.05 -44.4% 100.0% 0.002
Pan African GBP 0.08 -10.1% 313.3% 0.182
Goldplat GBP 0.13 -5.6% 52.2% 0.024
African Queen CAD 0.70 -5.4% 775.0% 0.026
Central African Suspended
Caledonia CAD 0.07 -50.0% 160.0% 0.031
Mwana Africa GBP 0.15 -15.9% 480.0% 0.096
Midlands Minerals CAD 0.25 -10.7% 233.3% 0.013
Africa, other
Shanta Gold GBP 0.07 -21.9% 470.0% 0.012
Banro CAD 2.41 -28.5% 173.9% 0.244
Kilo Goldmines CAD 0.48 -17.2% 140.0% 0.029
Loncor Resources CAD 1.55 0.0% 933.3% 0.045
Moto Goldmines Just taken over
Sunridge Gold CAD 0.66 -22.4% 1000.0% 0.039
Luiri Gold CAD 0.25 -3.8% 900.0% 0.015
Helio Resource CAD 0.65 -28.6% 333.3% 0.041
Tanzanian Royalty CAD 3.63 -44.2% 27.4% 0.312
Centamin Egypt CAD 2.34 -11.0% 387.5% 2.276
Obtala GBP 0.20 -33.9% 77.3% 0.063
GMA Resources GBP 0.04 -36.7% 210.0% 0.028
New Dawn CAD 1.36 -26.5% 2620.0% 0.038
Kasbah Resources AUD 0.06 -22.5% 120.0% 0.009
African Consolidated GBP 0.14 -19.7% 216.7% 0.067
KIG Mining EUR 0.20 -80.7% 1461.5% 0.015
Lake Victoria Mining USD 0.84 -43.6% 147.1% 0.024
Red Rock GBP 0.02 -35.4% 313.3% 0.012
Also in Africa
MDN CAD 0.58 -31.8% 38.1% 0.052
Douglas Lake USD 0.30 -56.5% 150.0% 0.022
Great Basin CAD 1.62 -31.9% 70.5% 0.516
Gold Wheaton CAD 0.31 -7.6% 90.6% 0.411
High River CAD 0.43 -10.4% 681.8% 0.266
Crew Gold CAD 0.20 -87.2% 14.7% 0.020
Oromin CAD 0.87 -39.2% 126.0% 0.079
Vatukoula Gold GBP 0.01 -16.3% 181.4% 0.087
La Mancha Resources CAD 1.82 -10.8% 3209.1% 0.247
Avocet Mining GBP 0.99 -3.0% 105.2% 0.319
CGA Mining AUD 1.77 -17.7% 86.3% 0.469
Chalice Gold AUD 0.55 0.0% 685.7% 0.071
NGEx Resources CAD 0.75 -8.5% 341.2% 0.096
Mainly copper
First Quantum CAD 71.93 -9.4% 464.2% 5.388
African Eagle GBP 0.05 -63.0% 311.1% 0.023
* 12 month
Source: market & company data, compiled by Barry Sergeant



blog comments powered by Disqus