South Africa in new gold rush for deeper mines

JOHANNESBURG, July 20 (Reuters) A rally in gold prices has sparked a new gold rush in South Africa as mining firms seek to exploit reserves buried deeper than humans have ever dug before.

Rocketing prices have transformed the ageing gold industry in the world's largest producer, with companies spending hundreds of millions of dollars on expansion projects.

South Africa already has the deepest gold mines in the world, some extending 3,500 metres below the surface to sweltering tunnels threatened by tremors.

That distance is seven times greater than the height of world's tallest building, Taipei 101 in Taiwan, but gold producers want to burrow still deeper.

''We estimate that between 3,500 metres below surface and 5,000 metres, there's probably as much gold as we've mined so far,'' said Dick Kruger, of industry group the Chamber of Mines.

Remaining gold deposits in South Africa are estimated to make up around 40 per cent of the world total and are three times larger than those of the United States and Australia combined.

Big producers AngloGold Ashanti and Gold Fields are making plans to dig deeper at existing mines in projects that would cost 852 million dollars and could exploit 14 million more ounces of gold.

''The projects that we're dusting off now with these higher gold prices are projects that are going to go from 3.5 kilometres to just above 4 kilometres,'' said David Diering, an executive with the world's third largest gold producer AngloGold.

INDUSTRY TURNAROUND It's a turnaround for an industry many were writing off little more than a year ago.

South Africa has produced around 1.5 billion ounces of gold -- just over a third of all mined gold in the world -- but much of it came from seams near the surface, now largely exhausted.

South Africa's annual bullion output has tumbled by 50 per cent over the past decade as high-grade mines ran out of ore and firms grappled with more difficult underground operations.

In recent years, a resilient rand also slashed export earnings and forced the closure of some loss-making mines.

A bull market in gold changed all that.

Fears of inflation and concerns over global stability have propelled gold higher, with prices hitting a 26-year peak of 730 dollars an ounce in mid-May.

Even after a recent retreat to around 630 dollars an ounce, a softer rand has sweetened the price for producers.

''There are no technological challenges to go to 4 or 4.5 kilometres. The impediments to going down to these depths were economic,'' said Diering, AngloGold's executive officer for business planning in Africa.

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