As the world’s sixth largest producer of gold, South Africa has a well deserved reputation for high quality gold bullion exports. However, due to a continuously developing decrease in demand, exports of the metal have fallen to a dramatic thirteen year low point. It has been speculated that this decrease in demand is due, in part at least, to the improving state of the US economy. As the GDP of the United States continues to grow, economic stability is encouraged and this always has a direct effect on the cost of precious metals. In the past three months, the GDP has grown at an annual rate of 3.5%. The growth that is currently occurring in the United States is the most impressive and encouraging since late 2003.

The Africa Gold-Mining Index, which measures demand and prices for bullion, recently dropped over 4%, ending on 957.73. This is the lowest closing number since April of 2001. The largest producer of gold in the country, Sibanye Gold Ltd, dropped by 6.5%. In several other parts of the world, this trend for falling prices is also being observed.

As the price of gold bullion has fallen in South Africa, this has led to gold mining companies needing to find innovative ways to keep costs down. This has inevitably led to unemployment for some and an uncertain future for many. There has been a lot of talk about certain companies merging and larger businesses taking over the smaller players.

The Chief Executive of Sibanye Gold Ltd told the press that he believed smart consolidation to be a good idea “on a regional basis” and that he doesn’t believe that “counterparts in the industry are on completely different pages either”.

Although the recent drops are quite dramatic, gold has been falling for over a year, experiencing a massive 27% drop during that time. Shortly after the decline started to take place, talks began to take place in order to establish a safe way to proceed with normal production. Cutting costs in South Africa’s gold mines is of course the biggest move but this of course has the potential to lead to labour strikes which could then create even bigger problems for the industry. Experts have estimated that between 60% and 80% of costs could be cut simply through consolidation, making that the sensible option for moving forward.