Table of Contents
- Managing older mines
- Consolidation and investment
- Conclusion
Managing older mines
It is impossible to estimate how much more gold remains in the world that has not been found or properly mapped. Some of it may be too deep to mine using current technology, or sits in countries with little infrastructure, making exploration difficult. Currently, some South African gold mines extend as deep as four kilometres, but at such depths mining requires a high gold price because of natural rock temperatures of up to 50⁰C (122⁰F) and vertical rock pressures of up to 100MPa.
The technical difficulties of deep-level gold mining in Africa have never deterred entrepreneurs. In a 1988 article in the SAIMM Journal, the author, CE Fivaz, describes how, by 1890, when unoxidised ores were first discovered on the Witwatersrand and recoveries dropped alarmingly, “gold shares were sold on an unprecedented scale, and doom and despondency seized the town of Johannesburg”. Then the MacArthur-Forrest cyanidisation process was deployed to treat the ores, and the longer-term future of the South African gold mining industry was assured.
Despite the age of the Barberton Mines complex, which has produced about 11 million ounces (344 tons) of gold over the past century, Pan African continues to mine it profitably. Proof of the mine’s remaining potential is that Barberton’s mining licence was renewed in 2021 for another 30 years.
Barberton is the eighth-largest mine in South Africa, with 1.66 million ounces (52 tons) of proven reserves. However, its age, and the nature of greenstone deposits, pose challenges at times. Some of these were evident in the first half of Pan African’s 2023 financial year, when there was a 20% year-on-year decline in production from the three underground mines at Barberton (Fairview, Consort and Sheba).
The issues management is having to tackle at Barberton are typical for old mines: it takes longer for miners to reach the stopes as they extend further from the access shaft, and the grades are declining. But Pan African has faced these issues before. It has changed the shift system to increase productivity, and is improving infrastructure and undertaking more exploration at Fairview. At the same time, even as production has temporarily fallen, the rand gold price has improved, helping cash generation. South African gold miners sell gold in dollars, so revenue benefits as the gold price rises or the rand/dollar rate depreciates, but their operating costs in rands don’t change at the same rate.
https://www.panafricanresources.com/wp-content/uploads/gold-bar-opt.jpgConsolidation and investment
Versatility and technology remain key to the long-term survival of South Africa’s mining companies.
As South African gold mines get older, there have been consolidations, takeovers and closures. These trends have benefited smaller, more agile companies like Pan African Resources, which in recent years has been able to buy old mine shafts or deposits that are still profitable but too small to interest multinational miners, whose overhead costs are higher.
Pan African, and other companies, are busy exploiting profitably the vast reserves of gold in surface tailings which are economically viable to extract using modern technology. In its latest acquisition in 2022, Pan African added various tailings owned by Mintails Mining SA, situated near Krugersdorp in the west of Johannesburg. Mintails will increase Pan African’s mining output by about 25%, at an all-in sustaining cost (AISC) of about $914/oz (against a current gold price above $2,000/oz).
South African mines are not only investing in technology that enables them to extract more gold from tailings, but also to mine safer, and to supplement their energy supply. Mining and processing are energy-intensive activities and South Africa’s electricity monopoly, Eskom, is finding it impossible to meet demand using its old coal-fired power stations. As a result, production can be impeded by Eskom’s daily requests to industrial customers to curtail power. This is one of the factors that has caused South Africa’s gold mining industry to shrink in the last ten years.
In response, many South African miners have been investing in alternative, greener power, which also contributes to addressing climate change. Pan African has led the industry in investing in renewable energy plants, starting with a 9.9MW solar PV plant at Evander Mines, which will be expanded to 12MW in the near future. It is now busy with work on an 8.5MW solar PV plant at Barberton.
https://www.panafricanresources.com/wp-content/uploads/Solar-Farm-opt.jpgConclusion
A new generation of companies is starting to dominate the South African gold mining industry. They are led by owners and managers who see opportunities to build a long-term future in mining, and they are proving their conviction with investments in exploration, renewable energy and community upliftment.