By Matthew Piggott, Metals Analyst, GFMS

Having held the position as leader in world gold production since 1905, South Africa lost the golden crown to China in 2007.

The last five years have seen consecutive declines in South Africa and current production is nowhere near that seen at the peak in 1970 when the country accounted for two thirds of global mine supply.

One of the key issues is the accessibility of remaining reserves in South Africa, although events late in 2007 regarding the actioning of legislation aimed at enhancing mine safety and the following ‘power crisis’ which came into play in early 2008, have placed the already beleaguered outlook under renewed pressure.

In the light of these events, GFMS believes it is increasingly difficult for South Africa to flatten declines or mount a sustained turnaround in output, as previously forecast.

China, on the other hand, is experiencing a period of heightened foreign interest in mining activities, a prominent example being the Sino Gold-Gold Fields alliance to explore and exploit precious metal resources in China.

Furthermore, compared to South Africa, Chinese gold production has been notably responsive to the rising gold price, as the mines are shallower and output over a larger number of smaller-sized operations can more easily be brought to bear by producers willing to exploit high gold prices in the near-term.

Recent statistics from the Chamber of Mines of South Africa point to a full-year production number of 254 tonnes, a 7.4% decline year-on-year. Figures from the China Gold Association state a full-year number of just over 270 tonnes.

Comparing the countries on a quarterly basis it can be seen that China overtook South Africa as the leading producer as early as the second quarter last year and we expect China to consolidate its lead as the number one gold producing country in 2008.

In addition to official and mine-by-mine data, GFMS accounts for an ‘informal’ component of the total mine production figure for both countries, which encompasses theft of gold and unofficial artisanal or illegal mining activities.

- This article first appeared in the March 2008 GFMS quarterly newsletter