By Chris Bishop
Gold was a topic that glistered throughout the Mining Indaba in Cape Town this week. Its price continues to climb – more than 12% in the last year alone – and the interest in digging more of it up in Africa is growing.
There are around 190,000 tonnes of gold in the world and demand for it is outstripping supply. A report from the World Gold Council circulated, at the Mining Indaba, said annual supply of gold was 3400 tonnes while demand was at 4500 tonnes. The demand is being driven by central banks who are buying a pile of the yellow metal every year. In 2018, central banks bought 656 tonnes – the biggest amount since major economies came off the gold standard – and last year another 650 tonnes. The buoyant demand is being put down to economic jitters around the world and the eroding of trust in the dollar.
“The gap between demand and supply is being filled by recycled jewellery but there are not enough new gold mines being built,” says John Reade, the head of research for the World Gold Council.
Reade, who worked in South African mines for Gencor, believes now mines will come on stream, but slowly, with hopes of a 30% increase by 2029. He said growth in gold mines was unlikely to be seen in South Africa where environmental and regulatory concerns were dampening new investment.
In South Africa, also, the deep narrow shafts of the gold mines, some going down as far as four kilometres, were making the seams expensive and hazardous to mine by many of the 93,150 people who work in the operations. The Minerals Council of South Africa also warned at the Mining Indaba of the bitter and costly harvest of power cuts in the country. In 2019, according to the latest MCSA report, gold production fell by 13.5 %, to 101.3 tonnes, largely due to power cuts of up to 3000MW at a time.
No matter, say the West Africans who appear poised to profit from growing gold demand. West Africa has a competitive advantage over the more established gold fields in the south. Its deposits are shallow, easy to get to and largely under exploited. It is a sign of the times that the winner of the investment battlefield contest – where people put their mining projects before a panel of experts – was a 2.2 million oz open cast gold project in Cote D’Ivoire that hopes to be 3 million oz before the end of the year.
Both Ghana and Nigeria are working on their mining codes to ease the cost of doing business to encourage more capital.
Nigeria, in particular, has high hopes, even though its mining is in its infancy and the whole economy struggles from a lack of electricity.
“We are sorting out this power problem and we hope to one day export more gold than oil from Nigeria,” says the minister of mines and steel development Olamilekan Adegbite.
The minister needs a golden touch combined with steel resolve to see it through.