ArcelorMittal SA keeps going despite setbacks

ArcelorMittal SA has lost so many billions of rand in recent years that it is surprising the parent ArcelorMittal group in Luxembourg — run by Indian steel tycoon Lakshmi Mittal — still wants anything to do with it.

But the subsidiary is strategic to African steel making, so the group has manfully put up with years of huge losses. It is so strategic that ArcelorMittal SA has revitalised production of the heavy sections mill at defunct Russian-backed Evraz Highveld Steel and Vanadium — once SA’s second-largest steel producer, which long ago slipped into bankrupt obscurity.

This is deeply ironic, considering the pressure that the government has put on ArcelorMittal SA over the years, including through “empowerment” interests related to President Jacob Zuma and the Guptas, whose activities still reek of outstanding fraud charges.

Unions have also done their best to sink the industry. Violent strikes across the mining (raw materials) and metals sectors in recent years have damaged these industries, along with Mineral Resources Minister Mosebenzi Zwane. Meanwhile, Eskom price hikes and power outages and the hideous costs of Transnet’s transport networks also helped close down the former Evraz and a big Tata steel plant in Richards Bay.

That said, it seems no one in SA wants to see the demise of the country’s primary steel making capacity. In late 2015, an alliance of labour and business called on the government to adopt 10 “core collective demands” to prevent a tsunami of job losses in a key sector of the economy.

Some of these demands — the imposition of tariffs to stop rampant cheap steel imports from China and the designation of steel for government infrastructure spend — have been met. But the “urgent rollout” of big state infrastructure projects has not come about.

ArcelorMittal SA’s R5.1bn loss for the year to December shows things have not got better.

The latest production update from Pan African Resources delivered several disappointments, underlining the case for another acquisition to diversify its sources of income.

Since selling its Uitkomst Colliery and Phoenix Platinum in 2017, Pan African is now focused wholly on gold mining and retreatment at Barberton and Evander.

The shares plunged 12.8% to 190c on Thursday after it said its gold output in the six months to December declined 7% because of various production challenges at Barberton.

Barberton was traditionally Pan African’s flagship, reliably producing about 100,000oz of gold a year.

The drop in production will accompany a lower realised gold price in rand and a big increase in the number of issued shares. The expected plunge in earnings, coupled with the possibility of an acquisition, suggests that the dividend may be in jeopardy.

Pan African is considering buying some of the assets of ASA Resource Group, which has gold and base metals interests in Southern Africa, and it is generally assumed its main interest would lie in ASA’s Freda Rebecca gold mine in Zimbabwe. Freda Rebecca made a $5.3m pretax profit in the six months to September 2016, in ASA’s last published report.

If milling issues are tackled, the mine could produce about 90,000oz of gold a year. However, mining in Zimbabwe remains fraught with risks.