Author: Tessa Kruger
Posted: Monday , 28 May 2007

JOHANNESBURG - South African gold production fell by 7.6% to 62,806 kilograms (2,019,276 troy ounces) in first quarter 2007 compared to first quarter 2006 as grades mined in the quarter declined by an average of 12.9%.
About 8% of production came from marginal mines, the SA Chamber of Mines said in a statement.
The year-on-year decline in the average grade mined to 4.32 grams per ton was facilitated by the 17.4% increase in the US gold price to US0/ounce and the 17.6% depreciation in the South African rand to R7.23/US$.

This resulted in a 34% increase in the rand gold price received by the mines and allowed mining companies to mine lower grade ore that had previously been uneconomic to mine.
But year-on-year increases of 19.6% in cash production costs and 17.5% in total operating costs before capex, hampered some of the flexibility given by stronger prices.
Mining companies invested the bulk of profits derived from stronger prices in capital expenditure - described as the lifeblood of the industry by the Chamber.
"Capex increased by 39% to R1.6 billion in the first quarter of 2007, which represents a recovery in capital expenditure after a decline in spend in both 2004 and 2005."