Strong gold prices should slow or even halt declining gold output in South Africa this year after 2006 production tumbled to the lowest levels since 1922, an official at the Chamber of Mines said on Wednesday.
"The short term prognosis is looking quite healthy," the chamber's Chief Economist Roger Baxter told Reuters. "The expectation is that the rate of decline in South African gold mining production is likely to slow or possibly... you could have a stabilisation depending on the specific outcomes of certain projects," he said in an interview.
The chamber released data on Wednesday showing that output in the world's largest producer of the precious metal slid 7.5 percent last year to 8.845 million ounces, the lowest in 84 years. South Africa's annual bullion output has tumbled by more than 50 percent over the past decade as high-grade mines ran out of ore and firms grappled with more difficult underground operations.
But last year's rate of decline slowed from a 13.1 percent fall in 2005 and mining firms had sharply increased spending on building new mines and extending old ones.
Capital expenditure among gold producers that are members of the chamber shot up 62 percent to 5.9 billion rand ($799.6 million) last year, Baxter said. "We're in the cycle where increased capex will feed through to increased mining possibilities so it will be interesting to see what happens during the course of 2007." It was uncertain how soon the spending would translate into more production since most of the capex was spent in the second half of the year and developing underground mines can be a slow process, he added.