South Africa: a setting sun?
Can anything arrest the decline in South Africa’s gold mining production? Rhiannon Garth Jones takes a closer look at an industry beset by problems and considers the future.
So productive have South Africa’s Witwatersrand goldfields been, the country’s currency is named after them. In previous years, the basin was a symbol of the country’s seemingly limitless resources of precious metals, but it is increasingly seen as symbolic of the deterioration in production across the mining industry as a whole, and gold in particular.
At its peak in the 1970s, South Africa was responsible for around 80% of global gold production and, according to the US Geological Society, it still has the largest share of gold reserves – as well as 90% of the world’s platinum. But, in January 2015, gold production reached a new monthly low, generating 87% less than it did in January 1980, and South Africa is now the world’s sixth ranked gold producer. Market Research’s report, South Africa Mining Report Q2 2015, predicts an average growth for the industry of 2.5% year-on-year 2015–2019, which is considerably lower than the 9.3% y-o-y growth experienced 2005–2014.
Beating around the bush
As with any dramatic decline, the explanations put forward are many and varied, and it’s unlikely that any one can fully account for the situation. South African gold production has been continuously deteriorating since its peak in the 1970s, and any theory that might account for it has to cover nearly 40 years.
The decline has not slowed since the end of the apartheid era (in fact, the reverse is true), so it cannot be said that the instances of violence that marked that period, such as Sharpeville and Soweto, or the sanctions imposed on the regime provide sufficient explanation although Neil Philips, Consulting Economic Geologist at PhillipsGold, believes that decreased investment during this period could have had a long-term impact on development and exploration.
Post-apartheid, the ANC soothed investors’ fears with largely market-friendly policies but, since then, other factors have made South Africa an unattractive investment prospect. According to the annual global survey released in February 2015 by the Fraser Institute, South Africa has fallen out of the top 10 mining investment destinations in Africa and dropped to 67th globally. Concerns about infrastructure and power supply have long been raised – the rail network struggles to get enough ore to ports, for instance, and an energy supply crisis in 2008 forced mines to stop work and costs billions of dollars in lost output. Poor energy supply also means uncompetitive rates, which in turn mean the country is reliant on exporting raw ore, rather than improving downstream processing and manufacturing its own products.
The five-month long strikes in the platinum sector last year, led by the Association of Mineworkers and Construction Union (AMCU), resulted in wage hikes of around 20%. Wage agreements in the gold sector expire in June, inflation is currently at 5.3% and, although the AMCU has been banned from striking, many are nervous about the impact that significant wage hikes could have. Graham Briggs, CEO of Harmony Gold, one of the major gold companies operating in South Africa, has asserted his company’s commitment to improving the financial literacy of his workers and minimising the chances of labour militancy. But concerns remain, especially since a turf war between the two key unions, the AMCU and the National Union of Mineworkers has been developing over representation at the next negotiations.
Another factor perhaps putting off investors is health and safety across the wider mining industry in the country. Although the fatalities for 2014 were the lowest ever, 84 people still died in mining, and tuberculosis, silicosis and asbestosis all remain real issues. South Africa continues to have one of the poorest safety records globally. Low literacy rates among workers can also make improving safety procedures difficult, as can mining at ever-growing depths.
The bigger picture
However, none of these factors have entirely prevented investment and improvement in the South African mining industry as a whole, or the gold sector. There are two main arguments put forward to explain the long-term decline of the sector. Phillips believes that the key issue is the failure of exploration. If two new goldfields had been found in the past 60 years, he argues, there could be up to 10 more large mines in production, boosting gold grades, increasing production, and encouraging further investment. More importantly, he says, ‘I cannot see anything else that could turn around the South African gold industry in the way some major exploration discoveries could’.
The second commonly stated long-term explanation is the increasing depths to which South African gold mines are extending. The deepest, AngloGold Ashanti’s Mponeng mine, reaches more than 4km below ground. ‘Deep gold mines face a number of technical and financial sustainability challenges that are amplified by the conventional, batched (non-continuous) drill-and-blast mining process. Crucially, the current mining method exposes people to risks that are becoming increasingly difficult to mitigate’, said Chris Nthite, Head of Media Relations at AngloGold Ashanti. ‘Moreover, deep-level mining is highly prone to seismicity, which increases with depth. To mitigate against the seismicity risk, we often need to leave 40% of our ore-bodies behind as safety pillars, which, as mining depths increase, rise to 50%’, he added.
Solving the problem
If the first step is admitting the problem, the second has to be finding a way to solve it. Philips suggests, ‘Since exploration for the past 60 years has not worked, the gold industry in South Africa might consider other methods, and especially other ideas’. He proposes redesigning tertiary geoscience training to provide a stronger grounding in sedimentology, stratigraphy, structure and modern alluvial systems, as well as challenging standard geographical models and using new versions to revisit old sites. Much like the Wood Review for Maximising Recovery from the UK Continental Shelf, Phillips also believes that discovery is a national priority, making fostering a culture of co-operation between mining operations key.
AngloGold Ashanti has also been focused on new approaches, founding a Technology Innovation Consortium with a range of original equipment manufacturers, suppliers, tertiary institutions and research institutions to develop technology that will allow safe, continuous mining at even greater depths.
Two approaches are currently under development – reef boring and ultra high-strength backfill. Currently, gold mining involves drilling holes many feet below the surface before using explosives. Reef boring uses smaller and more agile machines, drilling parallel access tunnels into gold reef deposits much more quickly.
Nthite explains the problems with current mining methods in gold reefs, saying ‘The thin, gold-bearing reef is mined along with waste rock to create an excavation large enough to accommodate equipment and people, as the work face is advanced and the rock extracted. Though necessary, this enlarged excavation causes significant dilution of grade (by up to 200%). The thin gold-bearing reef, mixed with waste rock, is carted through the extensive mine infrastructure at depth, across large horizontal distances and then up to surface, creating significant inefficiencies throughout the production chain. These inefficiencies often result in gold losses of up to 20–40%, as fine gold particles disappear into the micro fractures created by the blasting activities and additional fine gold is lost along the ore transportation process.’ Reef boring avoids these problems – in February 2015, AngloGold Ashanti reported it had produced 40kg of gold ore at one site, with an average grade of 90g of gold per tonne (including gold grades of up to 200g per tonne).
Ultra high-strength backfill replaces the underground support pillars, improving safety at the same time as increasing the achievable extraction percentage. So far, a backfill pumping distance of 400m horizontally and 10m vertically has been achieved. It is envisaged that this technique will enable mining at depths of 5km by reducing the associated seismic risks and improving the safety underground. Combined, the two techniques could enable safe, continuous mining of high-grade gold.
The company claims it is willing to share the techniques with other firms – if it does, and they work, this might be the best hope for a revival of South Africa’s gold mining industry.
35 large scale gold mines
197.9t annual production of gold
6th South Africa’s ranking in global gold production
192.91 Moz gold reserves
4km deepest mine
*facts taken from USGS