Steve Flatman, acting MD at Rand Refinery, explains how his company will overcome the challenges associated with South Africa’s declining gold output in order to maintain its ongoing sustainability.
Written by Lucy Mowatt and Produced by Alex Smith
Based in Germiston, South Africa, Rand Refinery owns the world’s largest single site refinery and smelter for the production of refined gold and value-added products. Steve Flatman, currently acting MD, has been working for Rand Refinery since 2006 and in the gold mining industry for 27 years. He explains the current challenges facing South Africa’s gold trade to Exec, and how the refinery is going to overcome these difficulties.
Flatman says that when the refinery was built, it had the capacity to refine 1,200 tonnes of gold doré a year. The 1970s saw a peak in South African gold production, with the company refining in excess of 1,000 tonnes a year. However, since then this figure has been declining steadily at an annualised rate of 6.3 percent over the past ten years, with last year’s 270 tons representing a new low.
“What’s happening is that the South African industry has been experiencing a slow but steady decline over the years, with each year becoming lower than the previous year. In fact, last year South Africa wasn’t the world’s major gold producer – it was eclipsed by China,” says Flatman. There are many mature deep level mines in South Africa which are now coming to the end of their lifecycles, while newer mines are not producing sufficient quantities.
According to the trend that has developed, he has calculated that South Africa will produce between 220 and 230 tonnes of the precious metal in 2008, which will mean that Rand Refinery will handle significantly reduced quantities, in spite of refining the whole of the nation’s gold supply.
Exacerbating the problem is the competitive nature of the worldwide gold industry and the competition to obtain mined doré. He says, “Refining capacity is probably about two to three times oversubscribed [worldwide], resulting in excess capacity in the industry.” This has resulted in consolidation of the market on a global scale, exemplified by the consolidation and closure of a number of refineries in mature markets such as the UK, Australia and South Africa. New refineries have also opened up in emerging gold markets such as Dubai, adding to the problem further.
New strategies
In order to survive, the company is looking at a number of strategies, which will both diversify and expand its capabilities. Initially, Flatman says that for the past five years Rand Refinery has been sourcing gold doré from mining companies operating outside of South Africa; instead of relying 100 percent upon the gold mined domestically, this figure has now dropped to approximately 60 percent. He says the additional 40 percent comes from Ghana, Mali, Tanzania, Botswana and Namibia. In fact, Flatman is very proud of the fact that Rand Refinery processes 80 percent of all of the gold mined in sub-Saharan Africa.
In addition, the company is really looking to extend its capabilities in the supply of value-added gold products, in order to capitalise upon the higher margins associated with these products compared to straight doré refining.“ Historically, Rand Refinery has only produced a limited range of value-added products, including items like Krugerrand coin blanks, small bars and investment bars,” Flatman says. “However, what we’ve started doing in the last year is the production of jewellery semis. We’re now able to produce, plate, wire and solder into the greater jewellery industry and that adds a premium to the gold price with the premium increasing further down the benefication chain.”
All of these value added products have now been grouped together into a new business unit of Fabrication, with equipment purchased from the old Musuku refinery integrated with RRL’s existing equipment.
The final major strategy that Flatman unveils is the diversification of feedstock for the smelter, which was built in 1966 primarily to treat the by-products of the South African gold mines production and extract any precious metals that may remain in that material.
Owing to declining South African gold production, the number of mine by-products, such as borax slag, has declined proportionately. As such, Rand Refinery has started to feed non- mine sourced waste materials, such as electronic scrapandspent catalyst, into the smelter to extract the associated precious metals.
These new sources of smelter feed are sourced globally and have the advantage that they are not directly related to the SA gold mining industry and so help to compensate for the declining production. Rand Refinery is unique in South Africa in its ability to process these materials efficiently, meaning that it has a niche in terms of recycling these waste products to produce valuable metals.
Staff retention
With all of these changes taking place, and associated decline of refining, there has been a need to retrain and refocus staff in new areas in order to save employee jobs by improving productivity. “It is quite challenging in terms of preparing employees for the future,” Flatman states. “We’ve embarked on a major change management project in the last few months, Project Kgatopele, to help employees come to terms with the change process.
“Employees often find that change is challenging and sometimes intimidating, but because of Rand Refinery’s historical business model, you obviously have to understand that if your incoming feed is continually declining then you are forced to change the business model; you can’t keep doing the same things, and that’s why very much we’re moving down the value chain.”
This focus on fabrication has also been applied in communities around the plant, in line with Rand Refinery’s corporate social policy. Working in collaboration with AngloGold Ashanti, The Gold Zone was established in 2000 to assist jewellery manufacturers in the area and to stimulate the manufacture of gold jewellery into the worldwide market. This ultimately provides local, and unemployed, people with the opportunity to develop skills which will allow them to operate in an international marketplace.
Good delivery
The quality of Rand Refinery’s gold is globally renowned, with the refinery achieving levels of purity reaching 99.95 to 99.99 percent, securing the company many customers around the world. Indeed, the company has gained the London Bullion Market Association’s (LBMA) accreditation as referee refinery. As such, Rand Refinery is one of only five refineries accredited by the LBMA to audit the applications of other refineries to the Good Delivery List. Although Flatman agrees that it amounts to a lot of work, he reflects, “It really is a feather in our cap. Certainly in terms of the analytical side of the things, it really affirms the accuracy of our assaying processes.”
The company is also accredited to ISO 9001 for quality, as well as holding ISO 18001 for occupational health and safety and ISO 14001 for environmental management. It also meets all required radiation standards in line with the National Nuclear Regulator requirements.
With strategies in place to handle the changes in the market and the declining quantities of gold being mined, Rand Refinery looks set to gain from increased diversity and a wider customer base and it is well positioned to handle the challenges of the future as it continues to diversify both its product range and geographic spread.
Bookmark with:
- Digg
- Reddit
- Del.icio.us
- Facebook
- Newsvine
Sign Up to Exec UK now for FREE!