ONE hundred and forty-five years ago, the South African gold industry was blighted by enormous amounts of capital excessively eager to finance holes in the ground, which became the origin of the old joke, attributed to Mark Twain, that defined a mine as a hole in the ground with a liar at the top. Today there is a different problem: even with gold worth more than $4,000/oz, South Africa can barely persuade anyone to start digging them.
The original version of the joke, published in the Detroit Free Press in 1881, actually went further: the hole and the liar would combine to issue shares and trap fools. The mining industry has spent the subsequent century and a half trying to shake off this unfortunate reputation, sometimes with mixed results.
Yet surely, if there ever was a time to open gold mines, it is now. Gold traded at about $1,800/oz in 2020, averaged $2,386 in 2024 and then went completely berserk. It averaged $3,431 last year, briefly topped $5,300 in January this year, and has since retreated to about $4,150.
Central banks, investors concerned about government debt and people increasingly suspicious of the world’s paper currencies have all been buying. The glitter has become irresistible.
You might imagine miners everywhere would be frantically excavating. Oddly, the global industry’s response has been comparatively restrained.
According to S&P Global Market Intelligence, 138 new gold mines entered production worldwide between 2020 and 2025, an average of 23 a year. Australia, Canada and the US have led the charge, with considerable activity in West Africa. Recent additions include Newmont’s Ahafo North in Ghana, Endeavour Mining’s Lafigué in Ivory Coast, and several substantial Canadian operations.
But these are expensive, long-term investments. Big mining companies are understandably reluctant to commit billions on the assumption that today’s extraordinary prices will survive for the next two decades.
Harmony Gold finance director Boipelo Lekubo recently made the obvious observation that even an expansion into a new underground mining area could take two or three years. “Who knows what the gold price will be then?”
Consequently, global gold output has hardly exploded. According to the World Gold Council, production increased by less than 1% last year to about 3,672t, just above the previous record. Output increased about 3% in the first half of this year. New mines are coming into production, but older ones are becoming exhausted. The industry is running up a down escalator.
South Africa, however, presents a particularly perplexing case. The country produced approximately 1,000t of gold in 1970, compared with just 88.5t last year. Yet the US Geological Survey estimates South Africa still has about 5,000t of gold reserves, about 7.6% of the world’s estimated total. These are not necessarily easily accessible or immediately profitable deposits, but they hardly suggest the cupboard is bare.
And it’s not entirely true that nothing is happening.
Australia-listed West Wits Mining poured its first gold at Qala Shallows on the Witwatersrand in March, with plans eventually to produce 70,000oz annually. Theta Gold Mines is developing old goldfields around Pilgrim’s Rest in Mpumalanga, targeting first production early next year. Sibanye-Stillwater has approved development of its Burnstone project near Balfour, while Aurous Resources has revived Blyvoor Gold. Pan African Resources and DRDGold are spending heavily on recovering gold from old mine dumps.
These are significant investments, though several involve reopening previously worked deposits or recovering gold that miners left behind. Very few represent the discovery and development of an entirely new ore body.
So what’s going on?
Stumbling blocks
Former Harmony Gold CEO Bernard Swanepoel, who now runs mining industry conferences, suggests the first mistake is assuming that because South Africa once had enormous gold deposits, there must automatically be equally attractive deposits still available.
“The statement ‘The orebody is there’ is one you can make with a lot more confidence than you can justify, because we haven’t explored,” he says.
An interesting drilling result is a long way from a bankable reserve. Establishing what lies underground requires sustained exploration, geological modelling, technical work and eventually the confidence to risk enormous amounts of money.
“The absence of bringing modern technology, like better exploration, to the South African orebody is a generational fuck-up,” Swanepoel says.
His criticism is directed at the government and industry. For decades, South Africans were preoccupied with dividing up the mineral wealth already discovered rather than finding more.
“We were literally redistributing and not doing the long-lead stuff to create.”
Swanepoel points out that South Africa once benefited enormously from Anglo American’s exploration spending. As Anglo withdrew, much of that expenditure and expertise disappeared. Other mining companies had failed to develop a comparable exploration culture.
The consequences are extraordinary. South Africa’s share of global exploration spending has dwindled to less than 1%. The country has nothing resembling Canada’s vast junior mining ecosystem, in which hundreds of small companies investigate prospects, raise speculative capital and occasionally discover something worth developing.
Swanepoel also says the country’s attitude towards investors is spectacularly unhelpful.
“We should not think ‘We are endowed with the best orebody and therefore you owe us the privilege of coming to explore in our country’. No other country is as arrogant as we are when it comes to exploration.”
Quick, predictable licensing would help. So would modern geological information and a serious effort to attract exploration investment. Swanepoel even suggests applying AI to the enormous accumulation of geological records produced by 130 years of Witwatersrand mining.
Yet there are other obstacles. South Africa’s richest known reefs often lie several kilometres underground, requiring enormously expensive shafts, ventilation, refrigeration and pumping. Reopening abandoned mines can be nearly as difficult as developing new ones, particularly where workings have flooded or infrastructure has deteriorated.
The higher gold price helps most where the infrastructure already exists.
Swanepoel argues that the immediate beneficiaries are established producers, particularly Harmony, which owns many of the old Anglo gold mines.
“The whole Harmony story was buying mines before they shut down and then keeping them alive,” he says. A higher gold price allows existing operations to extend their lives, rehabilitate infrastructure and develop previously uneconomic areas.
“It is much easier keeping a South African mine alive, thanks to a higher gold price. To some extent Harmony is living proof of that now.”
Interestingly, Swanepoel has little patience with mining executives who blame trade unions for the industry’s difficulties. Complaining about unions in a labour-intensive business, he says, is like New Zealand rugby players complaining about scrumming. Unions are part of the game. Good managers learn to work with them.
He is considerably more optimistic about technology, including robotics and mechanisation that could eventually make very deep mining safer and more economical. The Witwatersrand’s future, he believes, may depend on methods radically different from those that built Joburg.
But what happens at the smaller end of the industry, where the challenges are less about 4km shafts and more about simply staying in business?
Making it work
Mining entrepreneur Quinton George provides a particularly instructive example.
For seven years George has been involved in rebuilding Bosveld Mines’ Klipwal operation in northern KwaZulu-Natal, a relatively shallow, high-grade gold deposit close to the Eswatini border. The geological prospects were attractive. Almost everything else proved troublesome.
“We had various iterations of near success and then Covid, and near success and then load-shedding, and then [KZN] riots, and then floods and then, right at the end, shareholder disputes,” he says.
The operation eventually entered business rescue following a bitter shareholder conflict. George says the rising gold price contributed to the dispute, as investors became increasingly interested in controlling the asset.
The mine’s assets have now been bought by a new company, Royal Zulu Gold. George is no longer operationally involved, though he advises its community empowerment structure.
The company has an unusual approach to one of South Africa’s most persistent mining problems: zama zamas.
George says Bosveld developed a system, building on an approach initiated by former Harmony CEO Graham Briggs, that brought some local artisanal miners into organised mining activities. They receive protective equipment, work in designated areas prepared by the mine, and are paid according to the gold recovered.
“They’re part of the value network,” he says.
The advantage is that people who might otherwise be stealing gold become participants in its production. George stresses that arrangements suitable for shallow workings in KZN cannot simply be transplanted to the dangerous, deep-level operations of the Witwatersrand.
Equally important, he says, has been building relationships with traditional leadership. Royal Zulu Gold’s empowerment arrangements include community interests and an entity representing the Zulu royal family. George believes the involvement of the Zulu king and local traditional leaders has helped establish legitimacy in an area where disputes over mining benefits can easily become destructive.
“What’s really critical to any future operation, big or small, is the alignment with your community,” he says. Small companies lack the security budgets and financial resilience of the larger miners.
George identifies another structural problem: smaller mines often require too much money for individual investors but are too small to interest major mining houses.
“You’re in that space where it’s a lot of money for individuals, but it’s too small for big companies.”
He believes tax incentives for investors in junior explorers, similar to Canada’s, could make a substantial difference. The money exists, he argues, but the country needs to create more credible opportunities to invest it.
For all his misfortunes, George remains an irrepressible gold bull. He says gold could eventually trade at $8,000 or even $10,000 an ounce. At the current price, he already sees considerable scope for reviving neglected smaller operations.
At Klipwal, he says, the new owners are recapitalising the mine, upgrading the processing plant and rebuilding production capacity. Mining has resumed under Royal Zulu Gold.
It’s a satisfying outcome for a mine that has repeatedly come close to success without quite getting there.
And perhaps a useful example for the country. South Africa still has the geology, the technical expertise and, at current prices, a compelling financial incentive to mine gold. What it needs is the exploration, confidence and investment to turn that inheritance into new mines.
This article was first published in the Financial Mail. For more articles like this subscribe here.