Gold miners have mixed feelings about the presidency of Cyril Ramaphosa. It could usher in a more investor-friendly mining regime, but at the same time, hopes that SA will be better managed have caused the rand to strengthen. As long as the dollar gold price remains flat, the strong rand and inflationary pressures are squeezing miners’ revenue and profits. This puts some mines at risk of closure and increases the attractions of shallower prospects outside SA or low-cost tailings treatment in SA.

Pan African Resources’ two highest-cost mines, Evander Underground and Consort, are being reviewed. CEO Cobus Loots says management is talking to labour unions and nothing is ruled out.

In the six months to December, Evander Underground’s all-in sustaining cost (AISC) was R673,444/kg and Consort’s was R761,562/kg, against an average received gold price of R551,506/kg. In the same period last year, the average gold price was R565,298/kg.

Pan African as a whole is still profitable, though less so than in 2016. Its Barberton Mines were hit by technical issues, labour and community protests and Evander No 8 also experienced pumping problems.

The group is ramping up its lower-cost tailings treatment operations, including the huge Elikhulu project which is scheduled to deliver its first gold in August.

Another struggler is Gold Fields’ South Deep, on which the group has spent R29bn to date, including R19bn to buy it and R10bn on capex.

Once again, South Deep, where there have been various failed plans and the head of operations has changed almost every other year, fell short of targets last year. It produced 3% less gold than in 2016, at an AISC of R600,109/kg. CEO Nick Holland says the mine was unable to make up production lost in the first quarter of the year when there were two deaths and three falls of ground.

He says the fundamental issue that South Deep needs to tackle is not the quality of the orebody, which is excellent, or the mining method, which is correct, but improving the efficiency of the workforce.

South Deep employs about 6,000 people, including contractors, out of Gold Fields’ total global workforce of about 18,000, yet it contributes just over 10% of group global gold-equivalent production of 2,16moz. Gold Fields’ three Australian mines contribute 935,000oz.

Holland says Gold Fields is comfortable with the balance in its portfolio and is not planning to invest more in SA, but "we really like South Deep and we are prepared to work on it". Gold Fields cannot continue to support an operation generating negative cash flows but it is convinced there is significant potential at the mine for value creation, he says.

Gold Fields is continuing to spend on two projects, the Gruyere mine in Australia and Damang in Ghana, while it will complete a feasibility study at the Salares Norte deposit in Chile by the end of this year. Salares Norte would cost about US$850m to develop and Gold Fields has not yet decided whether it will bring in a partner, he says, though it has had several approaches.

Though two of Harmony Gold Mining’s SA mines are cash flow negative — Joel and Unisel — the rest performed well. Remedial action is being taken at Joel and Unisel, which is expected to improve their grade performance.

Overall, Harmony achieved an AISC of R500,248/kg against a gold price of R580,672/kg and was able to lift production profit by 10%.

Harmony bought Moab Khotsong from AngloGold Ashanti late last year which is expected to improve its cash flow almost immediately. A $100m equity raise to pay part of the acquisition price is pending.

CEO Peter Steenkamp says other attractive opportunities are to develop Golpu in Papua New Guinea, where a feasibility study will be completed by March, and to treat the Mispah tailings in the Free State, which were also acquired from AngloGold.

Mandi Dungwa, investment analyst at Kagiso Asset Management, says Harmony has delivered a good result with grades improving consistently since 2015. The issue for Harmony now is the sharply lower rand gold price.

"Management has done well by hedging materially at higher rand gold prices which is boosting results somewhat, but these hedges will roll off," she says.

"A further consideration is that, as is the case for other gold producers, Harmony’s production profile is scheduled to decline by as much as half of current volumes in the next five to six years, even after taking into account the acquisition of Moab Khotsong."

Tailings treatment company DRDGold, in which Sibanye-Stillwater recently injected its West Rand Tailings Retreatment operation in return for a 38% stake, also delivered a strong performance in the six months to December. It lifted gold production 11% to 75,267oz as the Ergo plant worked well and a stable flow of material was delivered, with two new sites at full production. The higher volumes more than offset a 4% decline to R547,653/kg in the average gold price it received.