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South Africa Gold Mine Output Drops 19%

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Gold production in South Africa dropped by 19% year-on-year in September, according to a report at Fin24.

This continues a trend of monthly gold mine production drops. South African gold output fell by 15% in August and 15.5% in July.

The country once led the world in gold production. The precipitous drop in output over the last few years could signal an overall drop in global mine output.

Although South Africa still ranks eighth in the world in gold production, it continues to rapidly fall down the list of leading gold producers.  In fact, South Africa may run out of gold within four decades, according to the Environmental Economic Accounts Compendium published by African Statistics Day. Analysts say that at current production levels, South Africa has only 39 years of accessible gold reserves remaining.

Large goldfields such as South Africa’s Witwatersrand Basin are nearing the end of their life cycles. More than 40% of all the gold mined in human history came from the Witwatersrand Basin. But annual gold output in South Africa has plummetted. In 1970, South African mines produced 1,000 tons of gold. Since then, production has steadily dropped. The country only produced 139.9 tons in 2017. That represents a better than 86% drop from the 1970 peak.

The fact they have already dug out most of the easy to reach gold represents one of the biggest challenges facing South African miners. As mining analyst Kobus Neil told MoneyWeb, the deeper the mines go, the further the miner has to travel, which comes with additional costs and safety concerns.

As you dig deeper into the ground, you need a higher gold price to make those resources economical, if there isn’t a favorable gold price, those resources can’t be mined economically.”

Global mine production fell slightly in 2017, the first drop in mine output since 2008. In fact, gold production has generally increased every year since the 1970s. The drop in 2008 was something of an anomaly, as it occurred at the onset of the 2008 financial crisis. The recent slowdown in mine production is more concerning. In fact, many people speculate we may be at or near “peak gold.”

Peak gold is the point where the amount of gold mined out of the earth will begin to shrink every year, rather than increase. During the Denver Gold Forum last September, World Gold Council chairman Randall Oliphant said he thinks the world may have already reached that point. Franco-Nevada chairman Pierre Lassonde also expects a significant dip in gold production in the coming years. During an interview with the German financial newspaper Finanz und Wirtschaft last fall, Lassonde said we’re seeing a significant slowdown in the number of large deposits being discovered. And in 2016, Mining.com analyzed the data and concluded there are no more easy gold discoveries.

Mine production was up 1.9% year-on-year in the third quarter, according to the World Gold Council Global Demand Trends Q3 report. Some of the largest producing nations saw double-digit declines during the quarter but these were more than offset by significant gains elsewhere.

Overall, gold supply fell in Q3. Mine production was offset by a dip in gold recycling and a significant reduction in hedging positions.

Despite the production increases last quarter, analysts say the gold industry may well be entering a long-term — and possibly irreversible — period of less available gold. As mining companies find it more difficult to pull gold out of the earth, it will mean less gold for refiners to produce for the consumer market. Remember, gold gets its value from its scarcity.

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