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Gold alive and kicking, Brexit may boost projects activity

BOUNTIFUL BREXIT
Two South African gold mining companies are expected to head for huge free cash bonanzas owing to Brexit

BOUNTIFUL BREXIT Two South African gold mining companies are expected to head for huge free cash bonanzas owing to Brexit

Photo by Bloomberg

29th July 2016

By: Sascha Solomons

  

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Gold is a vibrant industry and remains a safe haven in times of economic turmoil, despite proposals over the years for the yellow metal to be commoditised, asserts worldwide minerals processing and metallurgical engineering products and services provider Mintek.

“There is strong activity in the global gold industry and in South Africa, but owing to the declining South African competitive situation in the world market, an impression of a dying industry is created, which is not true,” Mintek business development GM Peter Craven emphasises.

He comments that gold has recently benefited from the uncertainty surrounding Britain’s exit, or Brexit, from the European Union, noting that gold again follows a very different trajectory from the normal supply and demand drivers of other commodities.

The World Gold Council said in June that, as a result of Brexit, it expected to see strong and sustained inflows into the gold market, driven by the “staggering” level of protracted uncertainty that investors faced.
The council said, at the time, that gold’s surge to $1 313.85/oz provided investors with a much-needed safe haven.

“As a result of Brexit, two South African gold mining companies were heading for huge free cash bonanzas,” ratings agency Moody’s said in June.

AngloGold Ashanti was set to generate an additional $120-million in free cash flow in the second half of 2016 and Gold Fields an additional $50-million free cash, Moody’s assistant VP analyst Douglas Rowlings noted in a statement.

AngloGold Ashanti has a globally diverse, world-class portfolio of operations and projects. It has 17 gold mines in nine countries, as well as several exploration programmes in the established and new gold-producing regions of the world. Meanwhile, globally diversified producer of gold, Gold Fields has eight operating mines in Australia, Ghana, Peru and South Africa, with attributable yearly gold production of about two-million ounces.

“Whenever there is uncertainty in the world, gold flourishes, hence, it is going through a boost at the moment. Every time there is an increase in price, there is an increase in project development activity, which benefits the industry as a whole,” Craven explains.

Project Potential
He highlights that 50% of the world’s exploration budget is spent on gold; therefore, gold projects possibly accounts for 50% of the world’s metallurgical mining industry development activity.

Craven comments that the gold industry is devoting more interest to opportunities to improve gold recovery and reduce the associated costs.

Companies mining gold in South Africa face a major technical challenge in trying to successfully and safely extract significantly small gold seams from very hard rock at tremendous depths, compared with the relatively ease of processing of it, he explains. As a result, mining companies in South Africa are focused on mitigating this challenge, he adds.

The Witwatersrand gold industry is mature, adds Craven and, therefore, does not require an enormous amount of testing or development work to establish process routes.

“As gold in the basin is relatively easy to treat, these mines need to aim for maximum gold recovery at minimum cost, especially during the current price-boosted period in the gold industry,” he notes.

Craven comments that, with regard to projects in the Witwatersrand basin, such as that of gold miner and explorer Harmony, Mintek offers support by optimising recovery and minimising processing costs.

“We are finding that there is a big interest in process automation, and are doing a lot of development and industry research for instrumentation and advanced process control, which can be used to retrofit an existing plant to improve its recovery and efficiencies.”

Craven concludes that the overall gold industry remains a substantial value-creating space and South Africa has to continue focusing on remaining competitive amid the pressure of having to mine challenging gold deposits.

Edited by Tracy Hancock
Creamer Media Contributing Editor

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