Bullion output in South Africa, the world's biggest gold producer, is due to extend its long-term decline at current prices, tumbling 15 percent by 2007, a government expert said on Wednesday.
Over the past decade, gold production has slid by 35 percent as high-grade deposits become exhausted and companies have to dig deeper to find more metal.
"A lot depends on the price and exchange rate, but we don't foresee any pick-up in production over the medium term," Alex Conradie, chief mineral economist with the Department of Minerals and Energy, told Reuters in an interview.
A rampaging local rand currency, which strengthened by 28 percent last year on top of 40 percent gains in 2002, has slashed export income from dollar-denominated gold, cancelling out a rally in the international bullion price.
Last year, the country's fourth biggest gold producer Durban Roodepoort Deep closed part of its loss-making North West operations and cut output due to the strong rand.
Even under an optimistic scenario with a softer rand that boosts the domestic gold price, output would remain stagnant.
"If that (local gold price) improves a lot in the favour of the mines, then we could see production levelling off, otherwise, if it stays where it is at the moment, the trend would probably continue down," he said.
Under the current South African gold price of around 85,000 rand per kg, gold production is forecast to dip two percent this year to 367 tonnes and shed 15 percent by 2007 to 320 tonnes, Conradie said.
Last year, output fell five percent to around 375 tonnes, compared to 580 tonnes in 1994.
"There are a few near-term projects coming on stream, but those will mostly just replace production from other mines that will stop producing, so we don't see any increase in production," he said.
For example, AngloGold's Ergo mine, which produced 51,000 ounces last year, is due to close within about two years, Conradie said.
South Africa still has the bulk of world-wide reserves with 40 percent. The United States and Australia, the next biggest, have only around seven percent each.
"Most of the new reserves are very deep, but at the current prices and exchange rates they are not economical," he said.
Last year, the domestic gold price averaged 88,000 rand per kg and in January it shot up to nearly 100,000 rand when the currency weakened sharply but it has since retreated to 85,000 rand.
Harmony Gold, the biggest South African producer and sixth biggest in the world, has several expansion projects, but they are based on the rand gold price recovering to 93,000 rand per kg.