Mining input costs have been characterised by a general easing of inflation compared to last year. But costs remain a challenge due to persistent electricity prices and higher financing costs.
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Specific factors like the cost of energy, imported goods and labour influence different subsectors within mining in varying ways, with the gold sector seeing the highest average increase in input cost inflation driven by the cost of mining deeper and lower-grade ore bodies.
According to Investec, despite the surge in the gold price as a safe-haven investment, amidst a highly uncertain global environment, production domestically faces challenges.
In addition, labour challenges, the effects of illegal mining and logistics bottlenecks weigh on mining activity and export potential.
Power is a persistent and significant cost pressure for the sector and, even with a stable prime lending rate, financing costs continue to elevate capital expenditure.
However a positive development is that the National Energy Regulator of South Africa has initiated a market inquiry into fixed charges, the generation capacity charge, legacy charges and other fees imposed by electricity distributors and municipalities.
The findings, expected in early 2026, will be crucial in understanding the impact of these structural changes on the mining sector’s competitiveness and profitability.
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Another positive development is that a strengthening rand has helped lower the cost of imported goods and services, with prices for some fuel-related products and transportation equipment having fallen.
The Minerals Council South Africa says in September mining input costs accelerated to 2.5% year-on-year, marking the highest rate recorded in its Mining Composite Input Cost Index for 2025.
This increase was primarily driven by a significant rise in intermediate mining and quarrying inputs, such as copper, iron and steel.
Additionally, transport and storage exerted upward pressure on input costs, largely due to higher road and rail freight charges, as well as increased costs across storage facilities.