Mining production increased by a modest 0.6% year-on-year in July, after a 5.4% decline in June, helped by the higher gold and platinum-group metals (PGMs) output, Statistics South Africa (Stats SA) reported last week.

Gold production increased by 0.9% year-on-year, following a 13.6% decline in June, and PGM output rose 4.3%, following a 19.2% decline the previous month.

Diamond production increased by 7.2% year-on-year, while nickel production rose by 14.7% year-on-year.

“In contrast, iron-ore production declined by 9.4%, after four months of expansion, while the production of other nonmetallic minerals remained weak, declin- ing for the sixth consecutive month in July,” Nedbank commented.

Excluding gold, mining output rose by 0.5% year-on-year after contracting by 3.9% in June.

Further, total production rose by 3.2% month-on-month following a 1.9% drop in June, as output of gold, PGMs and diamonds rose strongly by 13.9%, 20.8% and 18.5% respectively.

Production of iron-ore contracted by 17.9% month-on-month following a 10.9% rise in June, while output of other metallic and nonmetallic minerals production also declined.

Seasonally adjusted mining production increased by 4.1% in the three months ended July, compared with the previous three months, Stats SA said.

The main contributors to the 4.1% increase were PGMs, which contributed 1.9 percentage points, iron-ore contributing one percentage point, and coal, which contributed 0.9 of a percentage point.

Investment bank Investec commented that, although the performance of the gold and PGMs sectors improved in July, it remained difficult to assess with certainty whether production would continue to expand throughout the quarter.

“Mining growth data tends to be volatile and is usually subject to significant monthly revisions,” Investec stated.

Meanwhile, Nedbank said that total mining production was expected to remain weak in the coming months, constrained by poor growth prospects globally, while domestic aspects such as labour strikes and rising production costs would also have a negative impact.

Investec further pointed out that, including the latest produc- tion figures for July, the cumulative growth for the year to date amounted to 0.3%, which confirmed that the underlying momentum in production was weak.

“This, in turn, suggests that there is room for a further erosion in demand from the mining sector for locally produced manu- factured goods.

“The South African Reserve Bank previously noted that mining-related products accounted for nearly a quarter of manufacturing production in 2012. The absence of a meaningful and sustained recovery on the production side of the economy, coupled with slowing household consumption demand, favours a low interest rate environment until the end of 2014,” Investec said.

Meanwhile, mineral sales fell by 1.2% year-on-year in June, but the rate of decline slowed from 8% in May, as sales of PGMs and coal rose by 22.6% and 1.5% respectively.

“Strong sales growth was also recorded in manganese ore, as well as other metallic and nonmetallic minerals. However, sales of gold remained weak, falling sharply by 42.2% year-on-year in June after contacting by 42.6% in the previous month, while sales of iron-ore and building materials dropped by 6.1% and 29.6% respec- tively in June,” Nedbank said.