Fall in South Africa gold output seen tempered

Gold output in the world's biggest producer South Africa is expected to fall slightly this year, but a bigger slide is threatened if the local currency extends its bull run, a government expert said on Tuesday. South African gold production could nearly stabilise this year with a buoyant dollar gold price and a stable rand, Alex Conradie, chief mineral economist with the Department of Minerals and Energy, told Reuters.
The country has seen production tumble by over a third in the past decade as high-grade mines run out of ore and firms have to dig deeper to find new deposits.
This year output is forecast to slip only three tonnes to 363 tonnes, a decline of 0.8 percent after an estimated fall of six tonnes, or 1.6 percent, in 2004. Final figures were not yet available for last year.
The main factor in knocking output over the past few years has been the rampaging rand, one of the world's best performing currencies, which has strengthened 127 percent against the dollar since late-2001.
A strong rand, which rallied by 18 percent versus the greenback in 2004, slashes local income from dollar sales of gold, making some mines unprofitable and vulnerable to closure.
Last year the largest domestic gold producer, Harmony Gold, announced downscaling at six unprofitable shafts that had been producing a total of 220,000 ounces (6.84 tonnes) of output per year.
South Africa's number four producer DRDGOLD also was forced to close some loss-making operations last year.
He also projects the dollar gold price will average $447 per ounce in 2005, up from current levels just above $420 and near a peak achieved late last year.
"That is because of continuing instability, geopolitical reasons, especially the situation in Iraq, and also the US economy with the dollar weakening," he said.
That would result in a domestic gold price of around 86,000 rand per kg, compared with just over 82,000 rand currently and a range of around 100,000-75,000 last year.
Gold production, however, could fall further if the rand extended its three-year march higher, but Conradie said no estimates were available under those scenarios.