The possible loss of up to 1,400 jobs at Pan African Resources’s Evander gold mine could just be the start of more to come, with the strength of the rand leaving a swathe of South African gold mines running at losses or thin profit margins.
The Evander mine had all-in sustaining costs, which are the full costs of operating the mine and excludes any expansionary capital, of R673,444/kg by the end of December against an average received price for the six months to the end of 2017 of R551,506/kg.
"The government is going to have a serious issue on its hands if this strong rand continues," said Pan African CEO Cobus Loots, calling for urgent talks with the Department of Mineral Resources, which is under the new leadership of former National Union of Mineworkers general secretary Gwede Mantashe, the ANC chairman.
"We need to discuss this. There must be an awareness of where this strong rand is going to take us," he said.
Pan African had already retrenched 628 employees and 147 contractors during the year at a cost of R40m to reduce costs by R10m a month, but those measures have proved fruitless since the strengthening of the rand with the change in the country’s leadership as Cyril Ramaphosa replaced Jacob Zuma as president.
The gold price is now R510,000/kg.
At that price and based on the results gold mining companies released for the period to end-December, the company in the deepest trouble is Harmony Gold, with six of its South African mines producing gold at all-in sustaining prices well above the prevailing price.
For Sibanye-Stillwater, which would like its gold mines pumping cash to repay net debt of R23bn that nearly matches its depleted capitalisation of R25bn because of a hefty fall in its share price, the fall in the gold price has made its Beatrix operations close to marginal.
DRDGold, which processes old gold dumps, produced gold for an average all-in sustaining cost of R500,000/kg in the six months to end-December.