JOHANNESBURG (miningweekly.com) – Mining production decreased by 4.7% year-on-year in January, and by 5.4% month-on-month on a seasonally adjusted basis, Statistics South Africa (Stats SA) revealed on Thursday.

This followed month-on-month changes of 0.2% in December and a decrease of 1.1% in November.

The largest negative growth rates year-on-year were recorded by the gold sector, with output down 27.5%, other metallic minerals, with output down 18.1% and nickel, with production 17.1% lower year-on-year.

The main contributors to the 4.7% year-on-year decline were gold, with a negative 4.3 percentage point contribution, and platinum-group metals, with a negative 2.3 percentage point contribution.

The iron-ore industry, however, provided some saving grace to the mining industry, contributing 1.8 percentage points.

Quarter-on-quarter, seasonally adjusted mining production decreased by 0.6% in the three months ended January, compared with the previous quarter, owing to one percentage point drops in the gold and coal sectors.

Mineral sales decreased by 3.6% year-on-year in December. The largest negative growth rate was recorded for other nonmetallic minerals, falling 48.3%, or 3.3 percentage points, followed by iron-ore, with sales down 33.6%, or 6.3 percentage points, and other metallic minerals, with sales down 7.1%.

Seasonally adjusted mineral sales at current prices increased by 1% in
December compared with November. This followed a month-on-month decrease of 4.4% in November.

“Today’s disappointing mining production figures highlight the pressure the industry continues to face amid falling global commodity prices, weak demand and local structural impediments such as electricity supply and transport and logistics constraints.

“Ongoing uncertainty with regards to the Mineral and Petroleum Resources Development Act Amendment Bill is also likely weighing on sentiment (and future investment) in the industry, in our view. We continue to expect a relatively weak growth and activity outlook for the mining sector over the medium term,” commented BNP Paribas economist Jeffrey Schultz.

GOLD INDUSTRY DECLINE
Meanwhile, Stats SA said the historical values of the gold index showed the extent to which production in this sector had fallen. In January 1980, the index was 359, while the volume of gold produced was far lower in January 2015, resulting in the low index of 48.4.

In other words, South Africa produced 87% less gold in January 2015 than in the same month in 1980.

The fall in production has reduced gold’s contribution to the South African economy, with its 3.8% contribution to gross domestic product in 1993 having decreased to 1.7% in 2013. Gold had made up 67% of all mineral sales in 1980, but this had decreased to 12.5% in 2014.

Coal currently led the pack, having contributed 27% of total mineral sales in 2014.

South Africa had also fallen in global gold production rankings. Prior to 2007, the country was the biggest gold producer in the world; however, by 2014, it had fallen to sixth place. China was currently the world’s top gold producer.

“So with the waning importance of gold to South Africa, does the future hold any promise for the industry?” Stats SA asked.

One estimate suggested that the country would soon need to look beyond the precious metal as a major resource. At current production levels, South Africa would exhaust its coal resources in 119 years, and platinum in 218 years.

For gold, resources would be exhausted in 33 years.

“If this estimate holds true, many South Africans alive today will see the country taking on a much reduced role on the global gold mining stage,” Stats SA noted.