* Weaker rand, steady power supply to boost output
* Size of SAfrica gold industry not key
By James Macharia
JOHANNESBURG, April 8 (Reuters) - Falling costs and a weaker rand will spur South Africa's gold industry to boost output this year compared with 2008, but the country is unlikely to become the world's top gold producer again, a GFMS official said.
South African supply dropped 37 tonnes last year, with power rationing by state utility Eskom and frequent safety-related shutdowns contributing to the fall, Paul Walker, chief executive at GFMS told Reuters late on Tuesday.
"Last year was particularly bad because of the power crunch, but South Africa is starting from a better base this year and is unlikely to see another such cataclysmic fall," Walker said after presenting the firm's Gold Survey 2009.
According to GFMS' Gold Report 2009, global mine output continued the downward trend it has shown since 2006, with production down 62 tonnes to 2,416 tonnes.
Mine supply globally would tick up this year by between 20-30 tonnes over 2008 levels, buoyed by improved output from Asia, Australia and West Africa, particularly in Mali.
Gold producers are expected to see wider profit margins due to tumbling energy, raw material and equipment costs, which have fallen in the wake of the credit crunch.
Walker said gold could break through $1,100 an ounce, beating its current record high of $1,030.80 reached in March 2008, and forecast the rand gold price will rise in tandem.
Africa's top three gold producers, AngloGold Ashanti, Gold Fields and Harmony, pay their costs in rand and earn revenue in dollars, and are likely to report strong earnings for the first quarter on the weaker rand.
"The rand on average will weaken this year and coupled with falling costs this will help South Africa boost production compared with last year."
In the fourth quarter of last year, the good news for producers was the rand depreciated by an average 28 percent against the U.S. dollar.
The rand traded 0.6 percent weaker at 9.27 against the dollar on Wednesday, lower than its previous close in New York. It traded mostly weaker in the first quarter of the year.
Although South Africa has been spared the worst effects of the global financial crisis, the rand has weakened after being hit by risk aversion and slower world economic growth.
"In this price and cost environment, the South African gold industry should survive and thrive," said Walker.
Overall, Walker saw little chance of South Africa reversing the trend of dwindling gold production, which has fallen in recent years.
South Africa's gold output fell in 2008 to its lowest level in 86 years due to a power shortage and dwindling grades, ranking it third biggest producer behind China and the U.S.
It lost the world's top producer spot to China in 2007.
"In terms of the South African gold sector, size doesn't matter," he said.
"I think it is safe to say the bias on South Africa's gold production is that it is on the decline. Who cares if South Africa is ranked first or fourth ? The issue is, is there a sustainable gold mining industry here and the answer is, at current prices, for sure," Walker said.
(Reporting by James Macharia, Editing by Peter Blackburn)