Gold Price Surge Sparks Hope but Analysts Remain Skeptical

The gold rush is back in Johannesburg, but this time it's not just prospectors and gamblers searching for gold. With the price of gold at over $4,000 an ounce, even small mines are becoming profitable.

However, industry analysts are skeptical about the potential for South Africa to increase its gold production. Bernard Swanepoel, a self-described mining optimist, says that it's highly unlikely that South Africa will see a reversal of gold output in terms of production.

One reason for this is that many areas alongside gold reefs have been 'significantly encroached on by towns and squatter camps,' making it difficult to mine. Additionally, the issue of illegal mining, or zama zamas, is a major problem throughout the Witwatersrand.

Gold Ore's Sean Meadon acknowledged this issue at the Junior Mining Indaba conference, saying that 'there's about 3,000 illegal zama zamas in the area just 2km south of our mining exploration.' He also noted that simply building a high wall and employing security didn't seem to help much.

The mining sector is also burdened by high input costs and a strengthening rand. 'We sell in dollars, and a strengthening rand is the same as a cost increase,' says Swanepoel.