The gloom lifts
The mood among miners is more optimistic, but for now they’re focused on efficiencies rather than new mines and exploration
SA mining has regained some of its shine, now that President Cyril Ramaphosa is at the nation’s helm. And a notable feeling of cheeriness filtered down to speakers and delegates alike at the 2019 Mining Indaba in Cape Town this week.
But for all the speeches, panel discussions, coffee meetings and cocktail parties at the event, the answer to the biggest question remains unanswered.
Where will SA’S next big mine come from — or rather, will it come at all?
Many of the big names on the main stage couldn’t give an answer. That’s to be expected. The major mining companies — once the backbone of the SA economy — have been reducing their exposure to SA, not increasing it.
That’s despite the completion of the latest mining charter, which the government and industry say has finally provided certainty for investors — or at least those already exposed to SA.
Asked where the next new mine in SA might come from,
Anglo American CEO Mark
Cutifani said that, first, miners could do better with the assets they already have in terms of production and efficiencies.
“We have to make sure we invest in the assets we have.
I think that holds significant potential for the country as we stand today.”
Anglo has divested from a number of its SA assets. Most recently it sold off the last of its Eskom-tied coal mines. Now cost control seems to be the name of the game.
“The economic equation around mining is pretty simple,” Cutifani told the jam-packed auditorium. “Today and over the past 10 years shareholders have received $7 out of every $100 of revenue. The government, through tax, royalties and other direct payments has received $24; employees around $35; and suppliers and others another $35 … We have to improve our costs year on year by at least 5%-10%, because the material we are mining, in terms of getting it, extracting it, is getting harder.”
This requires significant innovation on the industry’s part.
“You are not going to have these mining giants any more. That is definitely changing,” says Warren Beech, partner and head of mining at law firm Hogan Lovells.
“It’s medium-sized companies that are really the future of investment in SA.”
There are new mines being opened in SA, Beech says. A good example is Vancouver-based Platinum Group Metals, which is investing in a project in the Waterberg in tandem with the Japanese government.
Vedanta Resources, a global diversified mining company based in India, is
PROFIT MARGINS SQUEEZED
also on a charm offensive in SA.
The company bought Anglo’s zinc assets in 2010, which included the Black Mountain operations in the Northern Cape, where Vedanta Zinc International has since developed its Gamsberg project, into which it has invested $400m in the first phase.
Now Vedanta is promising to build an $800m zinc smelter here too — an idea that’s hard to fathom for anyone watching the Eskom tariff application for prices to rise 15% annually for the next three years.
Cutifani and others have warned that Eskom’s high tariffs pose a significant risk to the industry and the economy as a whole. But Vedanta Zinc International CEO Deshnee Naidoo says the company is different to others in that it has been bullish on SA for the past few
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