* Third of all gold ever produced came from South Africa
* More than half of remaining mines face margins crush
* Labour unrest adds to the losing value equation
* S. Africa now only world's 6th biggest producer
A hand drill lying in the hillside tunnel of a 19th-century South African gold mine testifies to the back-breaking labour by black miners that built what was once the world's biggest bullion industry.
But even with basic tools and cheap labour, costs overran returns at the Kromdraai gold mine north of Johannesburg, which listed in London in 1893 and closed in 1914.
A century later, South African's remaining gold mines, which still employ a mostly black and lowly paid workforce, look set to follow the same fate, as the sun sets on an industry that has produced a third of the bullion extracted from the planet.
Gold's sliding price and surging costs are hitting an industry that laid the foundations for Africa's largest economy but has been slowly dying for decades as ore grades decline and shafts reach depths of 4 kms (2.5 miles), the world's deepest.
Unrest is also flaring as restive miners demand more for their toil after over a century of low wages linked to a system of migrant labour that outlasted the end of apartheid in 1994.
A weaker rand currency, which lowers local costs for domestic gold producers, has given them a temporary life-line of sorts but not enough to halt the terminal decline.
According to Roger Baxter, chief economist at South Africa's Chamber of Mines, in the fourth quarter of 2012 the price of gold averaged 509,000 rand per kilogramme, but it fell in the first six months of this year to under 400,000 rand/kg.
"This precipitous fall in the price ... has been the biggest decline that has taken place since the 1920s," he said.
"At a 400,000 rand a kilo gold price, our estimate is that about 60 percent of the industry is in loss-making territory."
This spells doom for an industry that accounted for 79 percent of world production in 1970 in its heyday, when Johannesburg, still ringed today by the hill-like humps of eroding dusty mine tailings, was dubbed the "City of Gold".
Thomson Reuters GFMS ranked South Africa sixth in global production in 2012, when it fell behind Peru and produced 177.8 tonnes of gold, just 6 percent of the world total, the country's worst year for production since 1905.
HAEMORRHAGE OF JOBS
Gold may have lost much of its lustre for the South African economy, accounting for only around 1.5 percent of gross domestic product, but it is still the country's main mineral export, which in 2012 fetched 72 billion rand, about 10 percent of all export earnings.
The industry has shed 340,000 jobs since 1990, more than two thirds, and there are fears of further big lay-offs as militancy among workers steps up ahead of tough wage talks this month.
"Further job losses are an inevitability, and these are linked to falling commodity prices, but long-term labour instability could act as additional downward pressure on the sector," said political analyst Nic Borain.
This is a headache for President Jacob Zuma's ruling African National Congress (ANC) party, which faces an election next year. It wants to head off further strife in the mines after wildcat strikes and violence stemming from a union turf war last year killed over 50 people and hit the country's credit rating.
The membership war between the Association of Mineworkers and Construction Union and the National Union of Mineworkers (NUM), a key ANC ally, has rumbled on, and the latest government effort to defuse it is showing little progress.
Ominously, even during gold's bull run over the past decade, South African producers shed jobs almost every year, according to government data. The number of miners employed in the gold shafts fell to 142,000 last year from almost 500,000 in 1990.
Much of the gold workforce, drawn from rural areas far from the shafts, is illiterate and will struggle to find work in a slow-growing economy where 25 percent are unemployed.
"It's not a labour force that naturally joins the queue to be part of the middle class. It has one foot in urban squatter camps and one in poverty-stricken rural areas," said Borain.
This could put pressure on the welfare system and pose a threat to social stability, he added.
DEFLATING BUBBLE, SHRINKING MARGINS
South Africa's fortunes as the world's No. 1 platinum supplier have been sinking, too, and top global producer, Anglo American Platinum, wants to cut up to 6,000 South African jobs to restore profits.
But gold is outpacing the white metal in the race to the bottom, dragged down by the plummeting price.
Less than two years ago, in September 2011, gold hit a record $1,920.30/ounce as investors, spooked in part by inflation concerns linked to the U.S. Federal Reserve's loose monetary policy, stampeded to bullion's safe-haven embrace.
They are now in flight on speculation the U.S. Federal Reserve will wind down its stimulus programme, known as "quantitative easing" (QE), as the U.S. economy picks up.
"Gold has been in a bubble, and that bubble is deflating," said Societe Generale analyst Robin Bhar.
Gold lost 23 percent in the April-June period and is now at $1,224/oz, 36 percent off its life high, and looks set to go lower as the Fed stops printing money.
"This year we could well touch $1,000. Anything you think could be negative for gold, will be negative," said Bhar.
South Africa's gold mines were able to earn tidy profits in 2008 and 2009 when gold was $1,000/oz, but costs - notably labour and power - have ballooned. In the fourth quarter of 2009 for example AngloGold Ashanti's cash costs in southern Africa were $575/oz, but by the same period last year its cash costs in South Africa had doubled to $1,166/oz.
Major South African gold producers have among the weakest pretax profit margins in the industry.
Harmony Gold, which gets more than 90 percent of its output from South Africa, keeps less than 10 percent of its sales as pretax profit, according to Thomson Reuters StarMine.
Gold Fields and AngloGold, with most of their production outside South Africa, fare better with about 19 percent and 15 percent, respectively.
This pales in comparison to 28 percent pretax profit earned by Canada's Kinross Gold Corp or the 44 percent that Russia's Polyus Gold delivers, StarMine data shows.
"BENEFIT THE PEOPLE"
Gold companies in South Africa have been paying above-average wage increases for several years. But those at the bottom of the pay scale were at an extremely low salary base as migrant workers, and, with an average eight dependants to feed, they still struggle to make ends meet.
In the current pay round, the NUM is seeking a 60 percent hike, over 10 times the inflation rate, for entry-level workers. Not to be outdone, the more hardline AMCU has made the fight for "a living wage" its battle cry under charismatic president Joseph Mathunjwa and wants an increase of 150 percent.
Unlike the unprotected Kromdraai workers more than a century ago, today's gold workers toil with automated drills, have helmets and boots and are covered by a safety code.
But AMCU and NUM insist they are still not being rewarded the full fruits of their labour, despite warnings from the companies and industry analysts that more wage pressure will accelerate the industry's deep decline.
"The majority of the people have not yet benefited from the distribution of wealth created within the mining industry," Mathunjwa's AMCU said in its demands to the gold producers.
"We believe the minerals of this country must now benefit the people," it added. But unless the wage talks reach an outcome that reflects the balance sheet realities, neither companies nor workers can salvage a gold industry crushed between a toppling price and climbing costs.