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Gold Fields CEO Nick Holland on Thursday said that South Africa might need to rely on the exploitation of other commodities, apart from gold, if it wished to maintain a mining industry.
Speaking at the second day of Paydirt's Africa Downunder conference, Holland told delegates that gold mining in South Africa had been in decline for many years, with mining operations required to go deeper underground to access viable gold.
"The reality is there is a lot of gold in the Wits basin, but it is very deep, and we are down to 4 km to 5 km, and the problem is that you have exponential geotechnical risks, exponential virgin rock temperatures, and higher costs to extract the gold and get it to surface.
"I don't think, at this stage, we have the techniques to do it. If we were going to mine down to 5 km, we wouldn't want to be sending people down there."
Holland noted that Gold Field's South Deep operation was also unique to the region, having 20 m to 30 m deep reef packages that were fairly flat dipping, compared with other orebodies in the region which only stretched for about 1 m to 2 m at more severe angles.
"It's been almost impossible to mechanise them, and more of that at depth will make it difficult," Holland said.
"As gold miners we have to make a profit today, so we had to diversify, and we are now producing some 2.1-million ounces a year outside of South Africa. However, we still have South Deep, which is one of the potential growth assets in the region. We have invested heavily in that project, a lot of money has gone into it, and I think South Deep will be successful one day, if given enough time and attention."
Holland on Thursday told delegates that global gold miners had failed to invest sufficient capital to sustain current production levels, much less increase production, with reported growth capital reported largely classified as sustaining capital.
"The cost to sustain production is increasing. The industry is mining more tonnes at lower grades to maintain ounces, so replacement is becoming more expensive as mines are getting deeper, grades are declining and will continue to do so in the future, and orebodies are becoming more complex and don't lend themselves to conventional cyanidation, which will increase costs."
Holland noted that over the last year, the industry had also seen significant consolidation of assets, but pointed out that assets were often recycled or re-badged, and that the consolidation of most gold companies failed to address the under-capitalistaion of the industry.
Exploration budgets have also been slashed in the wake of the 2012 gold price tumble, with Holland noting that the bulk of exploration over the past five years had been focused on brownfield projects and near-mine development.
He pointed out that the growth in global mine supply had slowed significantly, increasing only 1.8% in 2018, compared with a 6.2% growth in 2013, with 30% of the global reserves currently associated with assets where a construction decision is yet to be made.
Holland urged miners to make use of the higher gold price to catch up on exploration investment, boosting reserve lives.
Holland also raised concerns around cost reporting in the gold sector, saying the inconsistent reporting could be misleading stakeholders and "feeding the fire of resource nationalism", by misrepresenting the profits being made.
"Any growth capital people speak about is in fact largely sustaining capital. On the face of it, cost performance of the gold industry has been good – but this has been at the expense of sustainability of production."