JOHANNESBURG (miningweekly.com) – The current gold price is improving margins, sustaining the opportunity for existing miners to mine for longer, and probably creating new opportunities.

That is the view of DRDGOLD chairperson Tim Cumming, who spoke to Mining Weekly on the sidelines of the 130th anniversary of the listing of DRDGOLD on the Johannesburg Stock Exchange (JSE) in 1895. Cumming is also on the board of Sibanye-Stillwater.

Speaking to Mining Weekly, too, on the sidelines of the upbeat JSE event was Nedbank CIB market research head Arnold van Graan, who expressed the view that the gold price will result in increased investment – but that it will likely take time to materialise as companies look at which orebodies are exploitable and which projects now make economic sense.

Overall, there is an expectation that current global uncertainty, worsened by the large volume of dollars in circulation far outstripping the volume of available gold, will keep the gold price stronger for considerably longer.

DRDGOLD is in a phase of major R10-billion capital investment, which will extend the company's capacities significantly on both the Far West Rand as well as at Ergo on the East Rand.

“We do have a financial facility, but we've been saying, well, do we need it because these gold prices are giving us more of a capacity to do all of that and continue to pay our dividends," Cumming noted, while also taking into account the potential opportunities that the high gold price is creating for existing deep-level underground gold mines.

“A high gold price creates more opportunities. The problem is we don't know how long it will last or how high it will go, but as long as the sun shines, let's make hay, so to speak. We understand the reasons why the gold price is as high as it is. But maybe all the policy issues coming out of the United States, which have caused that uncertainty, maybe they'll dial that back, maybe Trump sort of let’s off and people say, okay. 

"But I'm not so sure, because the one thing with Trump, you just never know what he's going to say next. So, we'll live with continued uncertainty for a long while, and that's generally good for the gold price, and this gold price improves the margins, so it sustains, for existing miners, the opportunity to mine for longer, and it probably creates new opportunities,” Cumming added.

The World Gold Council’s latest report on gold demand trends for the first quarter calculates that total gold demand increased by 1% year-on-year to 1 206 t – the highest for a first quarter since 2016.

Many are also pointing out that the amount of gold in proportion to the amount of issued fiat currency is now far healthier from a gold perspective than from a fiat currency perspective, which could mean that even if the world moves out of this period of uncertainty, the huge volume of dollars that have been printed relative to the amount of gold remains too high. Against that background, gold is said to have re-based to a point where it will remain stronger for much longer and continue to boost gold mining.

Van Graan’s view is that South Africa will see increased gold-mining investment as a natural response to the current gold price.

“You’ll see higher capital being deployed into some of these orebodies. It might not be as quick as you would expect, because there's a process to be followed, but, undoubtedly, we’ll see increased investment and ultimately, a bit of higher production coming out of this.”

Mining Weekly: Do you agree that ongoing uncertainty will likely keep the gold price up for some time yet?

Van Graan: It's very hard to call the gold price at these levels, because it’s broken away from all the fundamentals that we used to track, so it's a tough call. But I think the general outlook is that gold will remain at elevated levels for longer. What that level is, I don't know, but I think we’re going to be in this prosperous environment for some time.

Should South Africa take its gold mines to considerably deeper levels at these gold prices and are there assets that can be brought back to life at these prices?

Again, at the current gold price, a lot of projects would now make economic sense, but you don't get companies just rushing in. Heads are still being wrapped around where gold could settle, because the last thing you want to do is to spend lots of capital, and there's a pullback, and even if you are convinced that the gold price is going to stay high for some time, there’s a process that needs to be gone through. So, will there be increased investment? Undoubtedly, but it will take time as companies work through some of the old plans, look at the options, look at which orebodies are exploitable at the higher level, and then get the capital decisions, and, again, that will take time. But undoubtedly, in the current environment, a lot of projects that previously didn't make sense, will make sense.

MAXIMUM GOLD PRODUCTION EXPECTED

Meanwhile, hopes are high that South Africa’s main remaining gold mining companies will maximise gold production and avoid repeating the gold sector’s big past mistake of closing operations too soon.

The strong contention is that, this time around, South African gold mining companies such as Harmony, Sibanye-Stillwater, Gold Fields, DRDGOLD and Pan African will mine their gold orebodies to the full possible extent so that value is not lost in the way that it was lost in the past. 

Poor past performance has resulted in highly unsafe illegal mining becoming unacceptably widespread and there is growing determination that this should not be allowed to be repeated.

During this financial year, Harmony will be investing more than R3-billion in its South African assets.

“We’re on an exciting growth path,” Harmony Gold Mining Company CEO Beyers Nel enthused to Mining Weekly in March, following the company’s half-year results presentation.

More than R2-billion is being invested in high-grade underground gold mining projects and over R1-billion into high-margin surface operation projects.

The projects under way at Moab Khotsong and Mponeng will extend the lives of each of these major high-grade gold mines to at least 20 years, with Mponeng producing 250 000 oz/y of gold and Moab Khotsong 200 000 oz/y over that period.

Phase 2 of the Kareerand tailings storage facility expansion is on track for year-end completion at Mine Waste Solutions, where life-of-mine steady-state production will be 100 000 oz/y of gold.

“These projects demonstrate our commitment to gold mining in South Africa, ensuring that they continue delivering excellent margins for years to come,” Nel outlined.

The Witwatersrand Basin gold operations of Sibanye-Stillwater, which owns 50.1% of DRDGOLD, include underground mining and surface treatment facilities at Driefontein, Kloof, and Beatrix.

Sibanye-Stillwater’s most advanced gold project is the Burnstone gold project, in Mpumalanga, where construction is under way, while its Southern Free State project is described on its website as being at an advanced exploration stage.

The South Deep mine belonging to Gold Fields has an 80-year-plus life-of-mine and Pan African Resources, which commissioned the Mogale Tailings Retreatment surface mining project on the West Rand in October ahead of time and below budget, is well advanced on the viability of the nearby Soweto Cluster as its next gold-from tailings project.

By the end of June, Pan African expects to have its Sheba gold mine in Barberton on a much better footing and good returns are anticipated from its high-grade underground mines in the area, as well as the Barberton Tailings Retreatment Plant surface operation.

Moreover, Pan African’s underground Evander mine, which hosts a large unexploited gold deposit, is providing ongoing life-extending material to enable the Elikhulu Tailings Retreatment Plant, ‘The Big One’, to live up to its name.

Last year, South Africa reportedly produced 100 000 kg of gold, which was 4 000 kg down on production in 2023 and close to 90 000 kg down on 1993.

World-renowned gold value-addition is carried out in South Africa by Rand Refinery in Germiston, which could readily cope with the additional gold output that the higher gold price is now fostering.