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Resources—partners in the new Kibali mine in the DRC—unveiled plans for a joint evaluation of the best way ahead for Obuasi, under which Randgold would lead and fund a development plan designed to rebuild Obuasi as a viable long-life mine. In the event, Randgold decided that the challenge was too great, and withdrew from the joint venture three months later, saying that the project did not meet its investment criteria. Having reduced Obuasi to processing tailings, with work on the new access ramp that it start- ed in 2012 continuing, AngloGold is carrying on with its feasibility study into transforming the mine into a mechanized high-grade opera- tion, based on proven and probable reserves of 24.53 million mt grading 6.7g/mt. "We have made a concerted effort to unlock a new opportunity for Obuasi, and the work we have done lays a good foundation for the operation in the long term," AngloGold Ashanti CEO, Srinivasan Venkatakrishnan, said in December. "But in the current envi- ronment, we believe it is prudent to conserve our resources and to revisit this opportunity when market conditions improve." South Africa's decline from world leader to the current No.7 can be put down to three main factors: the cost of labor, the cost of electricity, and the depth of the mines. The resources are there in the ground, but the economics of turning those resources into reserves are looking increasingly uncertain. In an article published in the Wall Street Journal last September, columnist Alexandra Wexler quoted Sibanye's Senior Vice President Dawie Mostert as saying, "This is an industry that's mature, old and in some degree of distress." Wexler went on to state that if South Africa's largest gold miners are going to sur- vive beyond the next few decades, a radical reshaping of the industry is necessary. Most are investing heavily in new technologies to reduce labor costs, she explained, citing Chamber of Mines of South Africa data that show how the cost of labor has risen by 180% over the past decade. Add to that electricity costs that more than tripled between 2008 and 2014, and the problems are writ large. AngloGold Ashanti's Venkatakrishnan summarized the situation in a Bloomberg interview around the same time. "What you're seeing in South Africa is a major margin squeeze," he said. "If you do noth- ing, the future of South African gold mining always heads towards a declining trend." Bloomberg 's own analysis of second- quarter 2015 company results showed that, on an all-in sustaining cost basis, South Africa's four largest producers were then losing money on about 35% of their pro- duction, with costs at around half of the country's operations above the current gold price. Bloomberg quoted Bruce Williamson of Imara Asset Management as saying, "The industry is stuck in a time warp," he said. "Every time they tried to innovate, it would prove too difficult and too costly so they fell back on the low-cost, low-skill model." However, "that low-cost mining is get- ting more expensive," the article pointed out, as the mining companies and the unions tried to negotiate a new wage deal. "Without an agreement, South Africa's gold industry will continue its decline," Venkatakrishnan stated. "What you'll see is companies cutting short the life of mines." Demand Trends in 2015 In its full-year update on demand trends, issued in early February, the WGC stated that gold demand remained resilient in 2015 as central banks and consumers spurred a strong second-half recovery after a turbulent first six months. The organiza- tion noted that the recovery was particular- ly evident in the retail investment sector, where the bar and coin market was strong in China, Europe and the USA. With demand totaling 985 mt and 849 mt respectively, China and India con- tinued their dominance in the global gold market, accounting for close to 45% of total gold demand during 2015, the WGC said. Global investment demand grew by 8% during 2015, reaching 878 mt, while the ETF market saw a slowdown in outflows: 133 mt in 2015, compared to 185 mt in 2014. Overall jewelry demand fell by 3% to 2,415 mt. Central Bank demand was around 40 mt higher in 2015 than in 2014, at 588 mt, as the need for further diversification was reinforced by a tum- bling oil price and reduced confidence in the global economy. The WGC's head of market intelligence, Alistair Hewitt, commented, "In a year that saw global economic and stock market tur- moil, the first US interest rate rise in nine years and falling oil prices, demand for gold remained resilient, coming in at 4,212 mt for the full year. Official sector purchases, combined with strength in the Asian mar- kets and continuing momentum in the U.S. and Europe, reinforced gold's credentials as a portfolio diversifier, a wealth preservation tool and a hedge against a range of risks. "Looking ahead, physical demand will continue to be supported by strong central bank purchases, and continued buying of jewelry, bars and coins by households across the world, led by India and China," he added. "If we just look at the year to date, the investment case for gold is as strong as ever. While stock markets have wobbled, gold has performed well." The WGC report noted that risk man- agement through diversification continued to fuel official sector demand for gold, with central banks adding to their gold reserves with renewed vigor in the second half of 2015 as diversification of foreign reserves remained a top priority. Russia's central 32 E&MJ; • MARCH 2016 www.e-mj.com G O L D M A R K E T Gold pour at Eldorado Gold's White Mountain mine in northeast China, where 2016 output is targeted at 75-85K oz.