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Despite the electricity supply constraints and economic and political uncertainty in South Africa, there are growing opportunities to further enhance the country’s gold beneficiation, says the London Bullion Market Association (LBMA).
Currently, South Africa, with about 93 t/y of gold production, is the world’s thirteenth-biggest gold miner and the fourth-largest in Africa.
The most significant local demand source is the country’s gold bullion coin programme, which saw 30 t of gold being used in the fabrication of official gold bullion coins in 2022.
In turn, gold jewellery fabrication appears to be less than 2 t/y, the LBMA reports in its ‘Spotlight on South African Market’ report, which was released on June 8.
The report finds that gold mining in South Africa is dominated by three companies – Harmony Gold, Sibanye-Stillwater and Gold Fields, which together account for about 76% of the country’s total output.
Additionally, the report estimates 9 t/y of gold is produced by artisanal and small-scale mining.
The LBMA states that even though gold jewellery fabrication is small in South Africa, the growing appetite for responsibly sourced products will increasingly resonate overseas.
The South African gold market adheres to the LBMA Responsible Gold Guidance and guidelines by the Responsible Jewellery Council and World Gold Council.
The US, in particular, represents exciting prospects. Notably, the African Growth and Opportunity Act allows for duty-free access to the US for South African products that meet certain value-added criteria.
The LBMA highlights that the expected redraft of the Precious Metals Act, which the South African Diamond and Precious Metals Regulator is currently undertaking, should help to bolster gold beneficiation in South Africa.
The Act prohibits the possession, acquisition, use and disposal of precious metals in unwrought and semi-fabricated forms.
The LBMA confirms that the Act is undergoing a consultation process to amend some of the transformation and beneficiation aspects, which the regulator plans to publish for more comment, before having the revisions enacted some time in 2024.
According to the regulator, beneficiation promotion will be enhanced under Section 12 of the Precious Metals Act, which deals with the commitment to satisfying local demand for domestic beneficiation before qualifying for export.
This provision will be extended to gold unwrought and semi-fabricated forms. Currently, this applies only to platinum group metals.
In many respects, the US is one high-profile example of an untapped market and, while this strategy has the support of the Jewellery Council of South Africa, it is also true that some infrastructure, such as special economic zones are yet to be fully exploited, the LBMA states.
There is also the challenge of being able to fund these opportunities, not least following news that the Financial Action Task Force has recently greylisted South Africa, which may weigh on inward investment.
Despite these challenges, it is worth remembering that South Africa already boasts a longstanding and highly regarded refining and mining industry, much of which dates back over 100 years.
Further, in 2022, South Africa’s bullion coin programme ranked fifth globally; over the past 13 years it has struck almost 470 t of gold coins.
Over and above this, the country is a key supplier of investment gold bars to overseas markets.
The LBMA believes the numerous steps that are under way to further develop beneficiation in South Africa put it in good stead to attract more investment.
Some challenges to South Africa’s beneficiation include electricity load curtailment, which, for example, imposes up to 20% curtailment of energy use for energy-intensive industrial users in South Africa during Stage 6 loadshedding.
There is, however, a silver lining in the form of renewables. Several gold mining and refining companies have accelerated their uptake or builds of renewable energy solutions.
For example, Sibanye is developing a 50 MW solar plant at the Kloof mine, while Gold Fields recently commissioned a 50 MW solar plant at the South Deep mine.
Further, precious metals refiner Rand Refinery has invested in a 2.5 MW to 3 MW solar and fuel cell plant to manage potential grid failures and to reduce carbon emissions.
Meanwhile, crime remains another issue that weighs heavily on the ability of the gold sector to contribute positively to the economy.
The pervasiveness of crime and growing lawlessness in South Africa could impact the entire gold value chain, the LBMA states.
Further, the exploitation of gold’s zero-rated export status precipitated various measures by the authorities, which, while curbing illegal activity, created challenging operating conditions for legitimate operators across the entire value chain.
On a separate note, both companies and the public are engaging private security companies to protect people and assets, performing functions that used to be the preserve of the police. It is estimated that the private security sector employs around 500 000 people, surpassing the employment rate of the mining industry as a whole.
The LBMA says the South African government also has plans to extend the validity of a Jewellers Permit from five years to ten years, while other measures are helping to promote new entrants into the jewellery manufacturing and fabrication of precious metals markets.