Show­ing signs of re­newed life

A num­ber of min­ing projects un­der-way in­di­cate a postcri­sis re­vival in the in­dus­try

Financial Mail - Investors Monthly - - Spe­cial Re­port In­fra­struc­ture - Al­lan Sec­combe

Big min­ing engi­neer­ing com­pa­nies are sound­ing an up­beat note about prospects for work in SA, de­spite the neg­a­tive com­ments from a num­ber of CEOs of min­ing com­pa­nies and in­dus­try bod­ies about the do­mes­tic in­vest­ment cli­mate.

“We be­lieve the SA mar­ket is show­ing some pos­i­tive signs of re­cov­ery as we are quite ac­tive in the ten­der mar­ket,” says Mur­ray & Roberts spokesman Ed Jardim, point­ing out that the com­pany’s R9.2bn African or­der book is largely ex­posed to SA and the bulk of that is fo­cused on the yet-to-be­built R4.8bn Kgala­gadi man­ganese mine in the North­ern Cape.

“We be­lieve the lo­cal sec­tor is show­ing some signs of re­newed life in the short to medium term,” he says. Mur­ray & Roberts is also work­ing at Northam Plat­inum’s new Booy­sendal mine, which is be­ing ex­panded. By Fe­bru­ary, the African or­der book stood at nearly R13bn for the com­pany’s un­der­ground min­ing di­vi­sion, and it had sub­mit­ted pro­pos­als for ten­ders worth up to R3bn.

DRA, another large min­ing engi­neer­ing com­pany, is also op­ti­mistic about the health of the SA min­ing sec­tor and Africa in gen­eral. “Com­pared to a year ago, the pipe­line of projects is look­ing a lot more promis­ing. We have had a num­ber of ma­jor projects kick off in West Africa as well as a cou­ple of smaller projects that are also in the process,” says DRA spokesman Alis­tair Hodgkin­son.

“Gen­er­ally, here in SA, we are start­ing to see the light in the mar­ket. Though it is still early days, the mar­ket is look­ing more promis­ing. With these par­tic­u­lar projects kick­ing off, DRA’s or­der book is look­ing a lot health­ier than it looked a year ago,” he says.

“When look­ing at the flow of new min­ing projects com­pared to pre­vi­ous years, it is cer­tainly look­ing more en­cour­ag­ing. A year or two ago, no-one was dream­ing about a new project. How­ever, now, they are all sit­ting there with the wheels spin­ning and ready to go.”

In SA, there are mixed sig­nals, judg­ing from what min­ing ex­ec­u­tives are do­ing and say­ing. On the one hand, Pan African Re­sources is push­ing ahead with a R1.7bn tail­ings re­treat­ment project at its Evan­der mine, east of Jo­han­nes­burg, plan­ning to process 1Mt/month of old dumps to ex­tract 100,000 oz of gold over 13 years.

Yet, Sibanye Gold CEO Neal Frone­man has said that as SA’s largest pro­ducer of do­mes­tic gold it would make no fur­ther in­vest­ments in SA, apart from one more plat­inum trans­ac­tion, be­cause on­go­ing regulatory un­cer­tainty and dif­fi­cul­ties in the re­la­tion­ship with govern­ment made it im­pos­si­ble to ac­cu­rately pre­dict the cost of do­ing busi­ness in the coun­try.

Sibanye re­cently stopped its large yet-to-be-built gold and ura­nium tail­ings re­treat­ment project west of Jo­han­nes­burg. The de­ci­sion to halt the multi­bil­lion rand project was made in part be­cause of the large bill, equiv­a­lent to Sibanye’s mar­ket cap­i­tal­i­sa­tion, to fund the $2.2bn cash pur­chase of all of Amer­ica’s pal­la­dium and plat­inum miner Still­wa­ter Min­ing as part of its ef­forts to di­ver­sify its ge­o­graph­i­cal and po­lit­i­cal risk away from its gold and plat­inum mines in SA and Zim­babwe.

But there are still a num­ber of min­ing projects un­der way, with pre­cious few new un­der­ground mines be­ing trig­gered in a coun­try that is host to the world’s largest known de­posits of plat­inum group met­als, chrome and man­ganese.

Among the projects in de­vel­op­ment are the R20bn Vene­tia un­der­ground mine that di­a­mond gi­ant De Beers is con­struct­ing at the de­pleted open­cast mine at the as­set. It is eas­ily one of the largest min­ing projects in SA.

In the plat­inum sec­tor, Royal Bafo­keng Plat­inum and its part­ner An­glo Amer­i­can Plat­inum are build­ing the Styldrift mine im­me­di­ately south of Sun City and the Pi­lanes­berg na­ture re­serve, a min­ing project right next door to We­sizwe Plat­inum’s Bakubung mine, which is also un­der con­struc­tion. The project was slowed to save money and to align the project with weak de­mand for plat­inum glob­ally.

The nearby re­cently built Ma­seve mine, owned by Canada’s Plat­inum Group Met­als, has run into fi­nan­cial con­straints and be­low-ex­pected pro­duc­tion and the com­pany is look­ing for a buyer of the as­set.

Ivan­hoe Plat­inum has started work on a mine at its Plat-reef project, while Im­pala Plat­inum is ramp­ing up two new shafts, 16 and 20 Shafts, to add 310,000 oz of plat­inum to the mar­ket by 2020 and lift group pro­duc­tion to 800,000 oz/year, a sig­nif­i­cant fig­ure con­sid­er­ing the SA plat­inum miner has sup­plied an av­er­age 4.2m oz of plat­inum in the past six years.

All the CEOs of the ma­jor plat­inum pro­duc­ers have warned that cap­i­tal in­vest­ment has been cur­tailed over a num­ber of years to such an ex­tent that sup­ply from SA, the world’s lead­ing source of the in­dus­trial and pre­cious metal, would not re­turn to the peak of more than 5m oz a decade ago and was likely to con­tinue slid­ing, pos­si­bly be­low 4m oz in the com­ing years.

New lease of life: Min­ing com­pa­nies’ or­der books are look­ing more promis­ing

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