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Low prices affect gold sector


THE gold mining sector has recorded a slump in business over the past 12 months mainly due to the low prices obtaining on the international market.


Economist and technical advisor to the Chamber of Mines David Matyanga recently told the Parliamentary Portfolio Committee on Mines and Energy during a 2015 post-budget analysis meeting that the challenges in the gold mining sector could be attributed to continued decline in gold price and high operating costs.

“In the past three months, the industry has witnessed 30% decrease in price from monthly averages of $1 671 per ounce in January to $1 140 per ounce in December 2014,” Matyanga said.

“In the outlook, the price is projected to remain depressed, ranging from $1 000 to $1 200 in the next 12 months,” he said.

Matyanga said gold production had been on a free fall with monthly average output having fallen by 5% from 1 229 kilogrammes (kg) to 1 166kg in 2014.

“If no immediate measures are taken, the likelihood of production reaching 1 990kg levels is very slim, and in the extreme mines will go under care
and maintenance to preserve the assets. While the reduction in the royalty of gold from 7% to 5% in the mid-term fiscal policy was reviewed as a positive move, the continued decline in the price of gold had eroded and purported benefit as the sector’s embedded and high cost structure (compounded by high electricity charges) remains beyond the reach of many companies,” he said.

The economist said most companies continued to make losses in the region of between $60 and $100 per ounce.

“It is against this background that the gold mining industry had appealed to government to intervene and compliment industry efforts in averting the current challenges,” he said.

Some of the intervention measures he mentioned were reducing Fidelity Printers and Refiners charge to 0,5% compared to 0,3% charged by Rand Refinery in order to save up to $12 per ounce and guaranteeing availability of electricity.

“We urge the expedition of the exercise as the stress the industry is going under cannot be sustained any longer,” he said.

Matyaka also appealed for a downward review of mining fees and charges which were not addressed by the 2015 budget.

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