Spotlight on the South African Market

Chapter 3 - Mining

South Africa was the fourth biggest gold producer in Africa in 2022 and ranked 13th in the world with output of 93t.
South African gold deposits contain 5% of global reserves and 36% of those in Africa.
Gold miners in South Africa are investing in solar power facilities to break their reliance on Eskom and reduce carbon emissions.

Introduction

South Africa has been a major contributor to global mined gold production since the discovery of gold at Witwatersrand in the late 19th century. Gold output from South Africa peaked in the early 1970s at more than 1,000t per annum. At this point the country’s gold mining industry was responsible for more than 70% of global production. Since then, output from South Africa has been gradually declining and it was surpassed as the world’s biggest gold producer by China in 2007. However, South Africa remains a major gold mining nation, with production of 93t in 2022, placing it as the 13th biggest gold producer globally, and 4th largest in Africa last year.

Gold Production

Despite having lower gold output than Ghana, Mali and Burkina Faso in 2022, South Africa only sits behind Ghana in terms of gold production from large-scale industrial mining in Africa. Ghana, Mali and Burkina Faso all have much larger artisanal and small-scale mining (ASM) sectors than South Africa. In 2022 ASM production accounted for 42%, 34% and 30% of gold output from Mali, Burkina Faso and Ghana respectively, compared to 9% for South Africa.

The South African gold mining industry is dominated by three major companies; Harmony, Sibanye-Stillwater and Gold Fields. These three organisations produced 76% of the country’s total output in 2022. Harmony is the biggest gold miner in South Africa with production of 41t last year. It operates eight underground mines, one open pit mine and four tailings re-treatments facilities in the country. Platinum group metal (PGM) mines in South Africa and the US form the biggest part of Sibanye-Stillwater’s business. However, the company also operates four gold mines in South Africa and is the majority owner of DRDGOLD, which operates two tailings re-treatment facilities. In 2022 Sibanye-Stillwater produced 19t from its South African gold operations. This was down from 33t the previous year as Sibanye’s mines were impacted by strikes in H1.22. Gold Fields only has one operation in South Africa, South Deep. However, this is the biggest gold mine in the country producing more than 10t in 2022.

As mentioned earlier, an estimated 9%, or close to 9t, of South African gold output came from the ASM sector in 2022. Very little information is available on gold volumes produced from this source in South Africa so this figure should be considered a high-level estimate. Workers in the ASM sector are commonly referred to as zama-zamas in South Africa. These miners illegally extract gold bearing ores, generally from abandoned mine workings, and are often linked to other forms of criminality. Despite contributing a meaningful amount to South African output ASM production from South Africa is relatively small on a global scale, sitting outside the top 25 ASM gold producing countries.

Top 10 African Gold Producers

Source: Metals Focus

Reserves & Resources

As of end-2021 South Africa held 2,725t of contained gold in reserves. This represents 5% of global gold reserves and 36% of total African reserves. The average reserve life of South African mines at this point in time was 16.2 years, longer than the global average of 14.4 years. This highlights the long mine lives of South African underground mines compared to shorter- lived operations elsewhere in the world.

Identified resources, excluding reserves, in South Africa contained an additional 12,767t of contained gold at the same point in time. This accounts for 10% of global gold resources and 61% of African resources. Reserves and resources identified in South Africa demonstrates that there is still sufficient gold remaining in the ground to support current production levels in the short-term and also growth over the longer-term.

Share of Global Reserves and Resources

*Excluding South Africa. Resources presented exclude reserves, all figures as of end-2021. Source: Metals Focus

Environmental, Social and Governance

Environmental, Social and Governance (ESG) issues are of growing importance to all mining companies. Gold miners operating in South Africa are faced with a number of challenges specific to the country alongside more general ESG concerns faced by all gold mining companies.

Eskom is the national electricity provider in South Africa, which generates the vast majority of its electricity from coal-fired power stations. This is the most carbon intensive source of electricity and leads to South African gold miners having more carbon intensive production compared to their peers elsewhere in the world. However, producers have begun to address this issue by investing in large solar power plants at their sites to reduce their reliance on Eskom and associated emissions. For example, Gold Fields commissioned a 50MW solar plant at South Deep in August 2022. Meanwhile, Harmony is currently building 30MW of solar capacity and plans to add another 137MW by 2025.

The gold-bearing ores being exploited in South Africa generally occur in narrow reefs that extend deep below the surface. As a result, the majority of gold mining in South Africa is undertaken in deep, narrow, underground mines. This makes mechanisation difficult and therefore mining is more labour intensive compared to most other major gold mining areas. Meanwhile, seismicity, heat and humidity all increase with depth, making working conditions challenging. This combination of factors means that injuries and fatalities are more common at South African gold mines compared to most other parts of the world, despite strict health and safety measures put in place by operating companies.

The positive contribution of gold mining in South Africa to the country as a whole and local communities should not be overlooked when considering ESG issues. For example, according to Minerals Council South Africa, the gold mining industry directly employed 93,841 people in 2022, paying these employees a total of 28.9Bn rand over the year. Gold miners also paid 608m rand in royalties to the government last year.

Mining in the SADC

South Africa is by far the biggest gold producer in the Southern African Development Community (SADC). In 2022 South African output accounted for approximately one-third of the total gold production from this block of countries. However, there are several countries in the SADC which produce a significant amount of gold.

Tanzania is the second biggest producer in the SADC, after South Africa, with output of 51t in 2022. The majority of this production comes from three major mines in the country. Geita, owned by AngloGold Ashanti, North Mara and Bulyanhulu, both owned by Barrick. These three mines had combined output of 33t in 2022, with the balance of Tanzanian production coming from a number of smaller industrial mines and the ASM sector.

Zimbabwe produced an estimated 49t of gold in 2022. Almost three- quarters of this came from ASM producers. Two of the biggest large-scale mines in the country are Kuvimba Mining’s Freda Rebecca and Caledonia Mining’s Blanket, which produced 3.4t and 2.5t respectively last year. The Democratic Republic of the Congo (DRC) had gold output of 45t last year, of which 20t is estimated to have come from the ASM sector. However, the biggest contributor to gold production in the DRC is Kibali, a JV between AngloGold Ashanti and Barrick. This is the biggest gold mine in Africa and produced 23t in 2022.

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