Two new projects should boost production

"The decline in production is attributed to an 8.4% fall in the average grade to 4.13 grammes per tonne, and the exhaustion of ore in certain older mine shafts," said the Chamber's chief economist, Roger Baxter.

Nevertheless, production of gold in the future is expected to steady at levels of 390,000-400,000 kg as two major gold projects reach full production this year.

'Cushion'

The two projects are Avgold's Target mine and South Deep, a joint venture between Canada's Placer Dome and South Africa's Western Areas.

"That will provide a bit of a cushion for loss in production we have seen elsewhere, with the exhaustion of certain areas," added Mr Baxter.

That will provide a bit of a cushion for loss in production we have seen elsewhere

Roger Baxter Chamber of Mines

Earlier this month, gold prices rose sharply on financial markets, above $300 an ounce for the first time in two years.

Changes by mining companies in the amount of gold they sell in advance of production - to reduce the risk of adverse price movements - helped affect the price.

Also, it was likely boosted by investors who had lost confidence in the real value of shares as a result of the scandal over accounting practices at the bankrupt energy group Enron.

Profits leap

Cash operating profit from South African gold mining in 2001 jumped by almost 53% in rand terms.

This resulted in gold miners paying 65% more tax. The industry paid 1.2bn rand (�74m; $105.2m) of tax in total.

The Chamber's Mr Baxter also said that the weakness of the rand was a significant factor.

This is because miners pay most of their costs in rand, but sell gold in dollars.