The gold price, AngloGold Ashanti, South African gold producers

I did two things yesterday that were noteworthy, breakfast and supper. No, I am kidding, I got a call from my mate I was talking about and we chatted about the gold price, AngloGold Ashanti, South African gold producers, the platinum market, the longer term prospects and what has happened to South Africa. And the other thing was Naspers. That was tough, more on that later, perhaps Monday, first thing, the South African gold market. We all know that South African gold production is slipping right? But the 40 year graph tells the most incredibly sad story. It is not that the gold is not there anymore, there is still a lot to be mined, but technology will have to advance further in order to extract all the gold under our feet here, the streets that we beat each and every day.



First, some background here. I found some great pie charts here ---> Gold Production History - Goldsheetlinks.com. First one, total world gold production in 1970, 40 years ago was 47.5 million ounces:










Whoa! You see that, South Africa produced two thirds of all the worlds gold, 32 million ounces back then. So you know it is less than that, you have been teed up for that by various publications over the last decade. By 1980 global production had actually fallen sharply, down to 39.2 million ounces and South African production was down 50 PERCENT to 21.7 million ounce. But still, that was 55 percent of global production and we were entering a golden period for South African gold mining companies, who I guess it is safe to say were champions of the mining world at that time, bullion prices were elevated and production was still strong.



But then fact forward to 2009 and you can see from the pie chart below that we have slipped badly, now we are the fourth biggest producer globally, behind China, Australia and the USA and now account for only 7.7 percent of global production. Yech.









But, what happened is that global production ramped dramatically from 1980 to 1998, from around 40 million ounces a year to over 80 million ounces. And then..... this is the point that Randgold Resources CEO Mark Bristow often makes, there is very little "big" in terms of finds and production to replace what is coming out of the ground. That production number has levelled off, check this bar graph out, courtesy same people, Goldsheetlinks.com






See us on that graph? Production levels are less than a quarter of what they were at the height in 1970. We now produce as much gold as we did in 1922. Obviously it is not like growing corn or maize, you can't make gold. See China? Two complete separate stories though, Chinese production has ramped and we have fallen to around 220 tonnes, call that just short of 7.8 million ounces. Arrr man.




So we have managed to establish something that we knew already. What is more worrying however is that this mate of mine said that mining skills, the ones that count, have left in their droves. To go to strange places where gold production is being ramped, or there are new and exciting opportunities where there is existing production. He suggested that only around twenty percent of the "old" mining skills remain in South Africa.



This piece really has very little of a conclusion, only to say that there seems to be very little on the supply side. And in my conversation with the dude, we mentioned that the 4000 year old habits of Indian buyers is perhaps not going to change any time soon (should they rather switch to equities and bonds), although I did say that it was not a given. Indian buyers are of course important to the gold market, they buy most of the physical from an individual point of view. Having said that, if I like luxury goods, I should like the input too. Gold. That saying from an old time trader type still sticks with me, he said: "trading gold will make you old".