South African gold miners grapple with rising costs despite record prices

IOL News

06-05-2025

For Gold Fields, which operates the South Deep mine in South Africa, all-in-costs have been spiking. All-in-costs for South Deep AIC increased by 6% to R1,032,462 per kilogram in the March 2025 quarter from R974,315 per kilogram in the December 2024 quarter.
Tawanda Karombo
South African gold miners are being weighed down by elevated costs, with the Minerals Council of South Africa saying on Tuesday that the sector recorded the highest increase in input costs.
This comes as Gold Fields recently said all-in-costs for the 2025 March quarter grew by 6%.
Bullion prices have been surging to record highs in the past few weeks although South African producers of the precious metal have largely not raised production due to higher costs.
Andre Lourens, an economist with the Minerals Council said the gold sector has been experiencing higher input cost inflation.
'In March, the gold sector recorded the highest average increase in input cost inflation, although benefiting from strong market prices - with gold averaging $2 986 per ounce. This underscores the ongoing cost pressures linked to mining deep-level, lower-grade ore bodies,' said Lourens.
For Gold Fields, which operates the South Deep mine in South Africa, all-in-costs have been spiking. All-in-costs for South Deep increased by 6% to R1 032 462 per kilogram in the March 2025 quarter, up from R974 315 per kilogram in the December 2024 quarter.
Gold Fields attributed this to 'lower gold sold in the current quarter, partially offset by lower capital' expenditure. Total capital expenditure for the South Deep operation fell by 42% to R431 million in the March 2025 quarter from R741m in the December 2024 quarter.
'The main expenditure items relate to a decrease in major component spend, UG mobile equipment replacement and refurbishments, surface infrastructure maintenance and new UG Infrastructure and maintenance,' said the company.
Its production for the quarter decreased by 8% to 2 244kg due to ore phasing and lower volumes processed despite an increase in mined volumes.
It was not just the gold sector that experienced higher mine input costs as the Minerals Council said South Africa's overall mining input costs rose by 3.6% in the first quarter of 2025.
'The increase in mining input costs moderated to 3.4% year-on-year in March, down from 3.8% in February, marking a continuation of the downward trend that began late last year,' said Lourens.
'While this is higher than the subdued 2.7% recorded in the fourth quarter of 2024, the outcome is unsurprising given volatility in both the domestic and global economy, much of which has intensified since January.'
This comes as a 'complex set of pressures continues to shape the cost landscape' including global trade frictions, pressure on the rand, and fluctuating Brent crude oil prices, which have all raised input cost volatility.
On the domestic front, 'political and economic uncertainty have further dampened sentiment, weighing on capital markets and prompting the South African Reserve Bank to maintain a cautious monetary stance,' necessitating a delay in much-needed interest rate relief.
Chemical prices and intermediate industrial inputs also stayed high relative to last year, reflecting persistent pricing pressure in key upstream supply chains, explained the Minerals Council.
Other mining sectors that took a big input cost include the chrome sector, with the third-highest increases recorded in iron ore, manganese, and other metallic minerals.
Nonetheless, the coal sector experienced the lowest input cost inflation of the major commodities - offering some relative stability in the cost of producing coal.
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