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We take a look at South Africa's mining production figures up to May 2018 and find that Gold has totally lost its shine in South Africa's mining sector. And Coal is the new gold of South Africa. Gold which was once South Africa's pride and joy and the hart of South Africa's mining industry is being totally eclipsed by other commodities such as Coal.
Gold mines in SA are becoming to deep to mine safely, the gold price is not supportive of deep mining and the costs and risks involved and the hunt for profits have sent mining companies after other commodities. |
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So just how far has gold fallen?
The graphic below shows the relative contribution of various commodities to South Africa's total mining industry over time. We take a look at the contribution of Gold, Coal, Iron Ore and Platinum Group Metals (PGM) to South Africa's total mining industry over time. And it clearly shows just how hard gold has fallen in South Africa's mining industry.
In 1980, Gold accounted for 66% of South Africa's total mining sales in South Africa. Currently for 2018, Gold sales only makes up 15.4% of total mining sales. And as the blue line, which represents gold's contribution to South Africa's mining sales shows, there has been a steady and persistent slide in the contribution of gold's contribution to total mining sales. Gold prices are nowhere near its all time highs, the demand for the commodity is declining and the cost of mining it is making it harder to do so profitably.
In contrast, Coal's contribution which was sitting at 9.8% of total mining sales in 1980, has steadily been growing and currently sitting at 30.5% of total mining sales. So coal's contribution to overall mining sales has increased by 211%, while gold's contribution tot total sales have declined by 75% over the same time period. The need for coal from ESKOM and the massive demand for coal from countries such as India, has seen the coal mining industry in South Africa boom over the last number of years, and it looks like this is set to continue as ESKOM is slow to move into renewable and clean energy.
South Africa exports massive amounts of coal to countries such as India, while Gold exports to the same country has been declining over time, as the younger Indian population move away from buying gold when getting married etc, as they no longer see gold as the ultimate store of value and wealth as it has been seen in the past.
Platinum Group Metals (PGM) had a massive growth spurt when prices hit all time highs, and with South Africa sitting with 80% of the world's platinum reserves. But declining prices and massive declines in the demand for platinum makes this commodity far less desirable to mine and to make money off. As new cars become more fuel efficient the need for platinum (used in catalytic converters in cars to reduce pollution) has declined and with it its price and with it the total contribution of PGM to 'total mining sales in South Africa.
As a side note, total mining sales in May 2018 amounted to R41.78 billion. If this continues for a full year total mining sales for 2018 will amount to just over R500 billion in 2018.
Note all data from Statistics South Africa (Stats SA)
Platinum Group Metals (PGM) had a massive growth spurt when prices hit all time highs, and with South Africa sitting with 80% of the world's platinum reserves. But declining prices and massive declines in the demand for platinum makes this commodity far less desirable to mine and to make money off. As new cars become more fuel efficient the need for platinum (used in catalytic converters in cars to reduce pollution) has declined and with it its price and with it the total contribution of PGM to 'total mining sales in South Africa.
As a side note, total mining sales in May 2018 amounted to R41.78 billion. If this continues for a full year total mining sales for 2018 will amount to just over R500 billion in 2018.
Note all data from Statistics South Africa (Stats SA)