Drop in gold price could cost SA $2.5bn
I Graulich
Business Day, 2 Jun 1999, p 11, 31 May 1999, p 17, Financial Times, 26 May 1999, p 26, The Star Business Report, 3 Jun 1999, p 3
The $25/oz drop in the gold price over the past month could cost South Africa as much as $2.5 billion in foreign exchange earnings in 1999. Gold fell to another 20-year low of $265.50/oz on 1 June. The Chamber of Mines chief economist Roger Baxter says that at constant production and at a fixed exchange rate of R6.20:$1.00, the drop from $290/oz to $265/oz means export earnings will drop from R27 billion to R24.5 billion for the current year. This puts pressure on the balance of payments, unsettling an already struggling economy. Mines that are threatened with the gold price at $270/oz include the Blyvooruitzicht and Durban Deep underground sections of Durban Roodepoort Deep, ERPM, and Anglogold's Deelkraal, South and West mines. Gold Fields will have to radically cut costs if its Tarkwa and Oryx mines are to remain open. Hedging policies have given some producers a lifeline, and Anglogold says its two high-grade projects, Moab and the South shaft deepening project, will go ahead. The World Gold Analyst, a specialist quarterly publication, says that the low gold price may be starting to impact on industry production worldwide. Total output of the 55 core gold mining companies it monitors fell by 7% in the March quarter of 1999. In addition to South African companies, Australian and US companies have seen production fall.
571/1999
Fewest Australian projects since 1986
S Wyatt
Financial Times, 26 May 1999, p 26
The number of operating gold projects in Australia has fallen to its lowest level since 1986 as the falling gold price takes its toll on the industry. Gold is Australia's second-largest commodity export and the current low gold prices are reshaping the industry. Expenditure on gold exploration continues to decline, but this will not affect production levels for several years. These are estimated to remain at around 300 t/y for the next five years. Production is being bolstered by the fact that many Australian producers have hedged against the gold price and sold forward more than four years' production. In mid-May, the price of gold in Australia was A$412/oz and average production costs were around A$400/oz. However, many producers are losing money, despite cuts in production costs, and further sustainable reductions in cost are difficult to achieve. Average operating costs for producers are estimated at A$318/oz in 1999.
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