A report issued by the state's statistics body Statistics South Africa on September 11 showed that, in contrast to the continued increase in output by the overall minerals sector, gold production had maintained its downward slide, falling by 5.2% in July against the previous month in 2006.
The report also said that year-on-year gold sales in June had dropped by 8.1%, falling to $458m. This bucked the trend being enjoyed by other minerals, with sales hitting $2.3bn, an increase of 18.1%.
The news came as gold burst through the $710 an ounce barrier, trading at its highest levels in 16 months. Some of the upward pressure on gold prices is being fuelled by fears the world's number one producer may be running out of steam. South Africa's continued falling output has sent shivers through the markets, especially as another of the standard bearers of the global economy, the US dollar, has dipped and the American economy is showing continued signs of fragility.
Nicky Weimar, an economist with locally based Nedbank, said South Africa was not taking full advantage of the recent rally in gold prices.
"We are not producing to our potential, which is insanity in this cycle of rising commodity prices," Weimar said in an interview with a local business paper published on September 12.
One of the reasons for the fall off in production has been industrial unrest on the country's goldfields, with stop work actions and slow downs affecting output. The powerful unions in the mining sector, in particular the National Union of Mineworkers (NUM), have been seeking wage increases for their members, with a number of strikes in support of the campaign, as has been the case in a number of other industries over the past six months.
Further industrial action has been threatened over the issue of workplace safety, with the high incidence of accidents in the sector under the spotlight recently.
Pressured by the government to improve its safety record, the mining sector as a whole has shown a willingness to boost standards, with an overall reduction of 16% in the number of workplace fatalities in 2006. However, the gold mining industry was well off the pace set by the whole sector, with just 5% fewer deaths last year.
According to the NUM, an average of 200 workers are killed each year in South Africa's mines, a figure it describes as unacceptable.
"The union has said that it would consider taking action against the mining industry if it continues to put profit before safety," NUM national spokesperson Lesiba Seshoka said on September 11. "We can't have an industry that is killing its workers."
So concerned is the government over the safety issue that it has threatened to revoke the licences of mine operators who do not improve conditions.
However, all is not gloom in the South African gold mining sector, with strong hopes it can overcome its difficulties and dig its way out of the hole it has found itself in.
A new entrant into the sector, Central Rand Gold, has announced it will be reopening old works around Johannesburg and extending their operational life by as much as 50 years.
Surveys by Central Rand suggest it would be able to extract far more than the 5m ounces required to make the venture profitable. Many of the open cut mines, abandoned in the 1970s could be reopened in 2009, while underground operations could commence in 2012, according to the company's CEO Greg James.
Ailing mine company Harmony Gold Mining, the world's fifth-largest gold producer, is seeking to reverse a downturn in its fortunes, announcing a major restructuring in August. The plan will see Harmony dispose of some of its less profitable mines and try to regain some of the $2bn in market capitalisation it lost earlier in the month after the resignation of long-term CEO Bernard Swanepoel.
A 12% drop in output in the second quarter, combined with higher costs, also fuelled the run on the company's shares, something Harmony's acting CEO Graham Briggs said would change.
"Costs are not the big fight, although we will trim out some. The number-one priority is getting the production engine going well," Briggs said in August.
Output from South Africa's gold fields has also been hit by transport problems, with delays in ore deliveries, and by aging infrastructure at some mines. These are issues that can be remedied. However, it has been a long time since there was a major discovery, posing the question as to whether South Africa's golden days may be fading.