Rosy picture ignores miners’ scepticism
It’s not hard to imagine a collective groan going up at the department of mineral resources and energy when there’s yet another opinion piece in Business Day poking them in the eye.
This is a case of telling the emperor he really isn’t wearing any clothes, no matter how much he might believe he is and tell others earnestly that he is finely adorned.
In this instance, it was the comment by minister Gwede Mantashe at the Fasken conference ahead of the Prospectors & Dealers Association of Canada conference in Toronto. There was wonderful news that SA is edging closer to a “gamechanging” plan formulated during intense talks between the department and the Minerals Council SA.
The addendum to the news was that there were still talks to be had with other stakeholders such as communities and presumably organised labour, though the latter weren’t mentioned by name.
What will change in the plan, which Council CEO Roger Baxter says is full of good ideas when it meets the interests of communities and the selfserving ideology of unions, remains to be seen, as does the timeline.
The impatience of mining companies to have progress and implement a strategy that will kick-start moribund exploration and a dearth of future projects stemming from exploration, is justified, but without the buy-in of communities it will meet resistance and obstacles.
This is not the naked emperor bit.
It was Mantashe’s comment to delegates from the Americas, Europe, Africa and elsewhere, that SA was a safe investment destination for mining as evidenced by the billions of rand in project expenditure detailed by major miners in recent weeks.
Mantashe clearly didn’t hear what Sibanye-Stillwater CEO Neal Froneman had to say about the R6.3bn investment in completing two partially built mines in platinum group metals (PGM) and gold and starting a small opencast PGM mine.
His comment about how SA was viewed as a risky investment could not have been more clear and that nothing should be read into the money Sibanye was spending over coming years.
“The commitment to invest approximately R6.3bn in the three major capital projects approved by the board should not be construed as a vote of confidence in the investment climate in SA,” Froneman said.
“Continued policy uncertainty, combined with other risks, such as those related to the reliability of water and power availability and the uncertain outlook for electricity costs, as well as risks of social disruption and inefficient regulatory processes are ongoing deterrents to significant investment.”
That doesn’t sound like the picture that Mantashe painted for investors.
And it certainly does not address, in any way, the demand from the minister that mine executives speak positively about the country to change investor perceptions.
Kumba Iron Ore and Anglo American Platinum — both Anglo American subsidiaries — are investing in their mines in SA.
For the iron-ore miner, this was a small life extension at its Sishen mine and a new mine at Kolomela to keep production steady.
For the PGM company, there’s a big decision to spend up to R15bn at its Mogalakwena mine to grow output. Harmony Gold is looking at tailings to add 100,000oz of gold in a few years, while it is studying a depth extension at its newly acquired Mponeng mine.
There are also the mothballed TauTona and Savuka mines that offer limited opportunities to extract pillars.
Impala Platinum is planning R10bn on growth in Zimbabwe and extending its Two Rivers joint venture in SA to add a total of 360,000oz of PGMs to the group.
If you look at the project list, there’s nothing brand new.
It’s all on existing footprints and are life extensions or cheap, easy projects rather than new mines.
This view may be cynical, but that’s the stark reality and an important one to consider.
Companies have enormous sums of sunk capital in their existing ventures, and it would be extremely odd for them not to invest relatively small amounts to extend their lives, regardless of the climate in SA, and dash offshore to start new mines at high cost and risk.
The big spend at Sibanye, for example, is only because the K4 PGM mine and Burnstone gold mine were partially built.
There was no way Sibanye was going to start brand new deep-level mines in SA. That much was clear.
A lot of this capital is going towards extending the life of mines, replacing depleted resources and keeping production steady or marginally higher.
Consider that the PGM sector has not invested in growth for a decade and that it now has to catch up fast.
The gold industry is a shadow of what it was and these investments are not going to change that.
To consider Mantashe’s comments against the reality of the spate of investment announcements recently, there’s clearly still a glaring gap between the rosy picture the minister paints and the lived reality and wariness in the sector.