ANC leader brings hope for mining, says Mbazima

Anglo American, which has stopped sales of mines in SA, wanted to boost iron-ore, coal and manganese output but was unable to due to the lack of rail and port capacity, Anglo American SA deputy chairman Norman Mbazima said.

In a wide-ranging interview at the African Mining Indaba this week, Mbazima said the election of Cyril Ramaphosa as president of the ANC and soon-to-be president of the country was positive for the mining industry.

Players have felt rail constraints involving the three commodities, with BHP champing at the bit to export more manganese from the Northern Cape to Port Elizabeth before it unbundled South African and other assets into South32.

Mbazima said Anglo was keen to feed more minerals into the market, but simply could not because of the capacity constraints within the state-owned rail and port facilities.

Anil Agarwal, a billionaire Indian businessman who chairs India’s largest mining company, Vedanta, has taken a 21% stake in Anglo, making his family the largest shareholder in the diversified miner. In an interview with Business Day at the indaba, Agarwal said he urged CEO Mark Cutifani and chairman Stuart Chambers to halt sales of South African mines and invest more in its historical home base.

While Mbazima said the cordial conversations between Agarwal and Anglo’s executive were constructive, the company had restored its balance sheet to health and opted of its own accord to stop asset sales.

“We are happy with where we are now so we should look to the future and say ‘how do we grow our portfolio?’,” he said.

Anglo had kept its exportfocused thermal coal mines in SA, selling its entire portfolio of mines that supply coal to Eskom, but growth options for coal were limited, he said.

The Transnet freight rail line to Richards Bay Coal Terminal could send about 76-million tonnes to the harbour compared with the port’s installed capacity of 91-million tonnes.

The 60-million tonnes a year capacity on the railway line from the iron-ore mines near Sishen in the Northern Cape to Saldanha was also a constraint for Anglo subsidiary Kumba Iron Ore, which had a 45-million tonne allocation, he said.

“We can increase iron ore by this, that and the other, but we can’t increase it by a big chunk right now until that capacity is increased. Overall, we are in a situation where we can optimise our assets and make incremental production efficiencies and therefore increase production, but we can’t do any big thing until some of the constraints that exist are removed,” he said.

In an industry crying out for regulatory certainty and a less hostile approach from the government, Ramaphosa’s appointment had brought some hope.

Ramaphosa, an independently wealthy individual, helped the formation of the National Union of Mineworkers in the 1980s, making it the largest union in the country.

As a businessman, he has been involved in various mining ventures and deals, including platinum miner Lonmin and commodities trader Glencore.

It is that background, along with his being a skilled negotiator, that has given the mining industry cause for hope.

“It’s very helpful if the president of the country understands your industry…. But we won’t be talking to Cyril, he’ll have a team and they should similarly be people who know the industry, who understand it and know the economy, who we can discuss details with,” Mbazima said.

Investment in the mining sector is set to soar in 2018 with the possibility of more policy certainty in the sector, the Chamber of Mines said on Thursday.

Briefing Parliament, Chamber of Mines CEO Roger Baxter said delegates at the just-ended Mining Indaba in Cape Town were generally optimistic about the future of the sector and commodities in Africa.

After a year in which relations between the mining industry and the mining ministry plummeted to a record low over an impasse on the Mining Charter, there was excitement around the possibility of ANC president Cyril Ramaphosa taking over as SA’s president and creating more policy certainty.

“Should policy in the sector stabilise, investors say there will be 80% more investment. You really can see the change from last year when it was like dead men walking,” the chamber’s chief economist, Henk Langenhoven, said.

Regulatory uncertainty has seen investment in the industry decline in real terms over the past four years. Mining contributes 7.48% of GDP.

Total mining production was 4.0% higher in 2017 compared with 2016. Seasonally adjusted mining production decreased by 1.7% in the fourth quarter of 2017 compared with the previous quarter but the prospects for the sector are strong for 2018.

The sector is also expected to regain momentum in the first half of 2018 given strong Chinese demand, particularly for iron ore, while commodity prices also remain supportive, said FNB senior economic analyst Jason Muscat.

But a change in the national leadership also bodes well for the manufacturing sector, which is also expected to perform better in 2018.

While total manufacturing production decreased by 0.5% in 2017 compared with 2016, seasonally adjusted manufacturing production increased by 1.5% in the fourth quarter of 2017 compared with the third quarter.

The sector is expected to recover at the start of 2018.