9.5 CHAPTER 9. THE LITHOSPHERE
Activity: Dropping like a gold balloon
Read the article below,which has been adaptedfrom one that appearedin the Financial
Mail on 15th April 2005 andthen answer the questions that follow.As recently as 1980, South Africa accounted for over 70% of world gold production.
In 2004, that figure wasa dismal 14%. Chamber of Mines figures showed that SA’s
annual gold productionlast year slipped to its lowest level since 1931.
Chamber economist Roger Baxter says the ’precipitous’ fall in production was caused
by the dual impact of the fall in the rand gold price due to the strong rand, and the
continued upward rise in costs. Many of thesecosts, laments Baxter, are ’costs we
do not have control over’. These include water, transport, steel and labour costs,
which rose by 13% on average in 2004.
He provides a breakdown of the cost components faced by mines:- Water prices have risenby 10% per year for thepast 3 years
- Steel prices have increased by double-digit rates for each of the past 3 years
- Spoornet’s tariffs rose 35% in 2003 and 16.5%in 2004
- Labour costs, which make up 50% of production costs, rose above inflation in
2003 and 2004
At these costs, and at current rand gold prices, about 10 mines, employing 90 000
people, are marginal orloss-making, says Baxter.
- Refer to the table below showing SA’s gold production in tons between 1980 and 2004.
Year Production (t)
1980 675
1985 660
1990 600
1995 525
2000 425
2004 340
Draw a line graph to illustrate these statistics.- What percentage didSouth Africa’s gold production contribute towards global production
in:
(a) 1980
(b) 2004 - Outline two reasonsfor this drop in gold production.
- Briefly explain howthe increased cost of resources such as water contributes towards
declining profitability ingold mines. - Suggest a reason whythe cost of steel might affect gold production.
- Suggest what impacta decrease in gold production is likely to have on...
(a) South Africa’s economy
(b) mine employees - Find out what the current price of gold is. Discuss why you think gold is so expensive.