MANTASHE OPENS 26TH MINING INDABA TODAY

MINERAL Resources and Energy Minister Gwede Mantashe (pictured) is scheduled to officially open the 26th Annual Investing in Africa Mining Indaba in Cape Town today. The Mining Indaba is the world’s largest gathering of mining’s most influential stakeholders and decision-makers in African mining. “Team South Africa will assure current and potential investors of stability, regulatory certainty, rule of law as well as promote new investment opportunities that the country has to offer,” the Department of Mineral Resources and Energy said on Friday. The Mining Indaba comes as retrenchments are set to rock the chrome industry with Samancor and Merafe Resources announcing that they would potentially retrench thousands of employees amid price volatility and power utility Eskom’s load shedding.

STRENGTHENING commodity prices not only saved the day for local asset manager returns last year, but they also contributed to the relatively big anticipated turnout of more than 7 000 delegates at the annual Mining Indaba, which starts today.

The event in Cape Town has attracted delegates from some 90 countries. Mining, once a key driver of our economy, has suffered tremendously in recent years, with hundreds of thousands of job losses, and projects falling by the wayside, due principally to see-sawing government mining sector policies and the weak economy.

For local miners, some issues Mineral and Resources Minister Gwede Mantashe may wish to address in his speech at the opening of the conference relate to power utility Eskom’s electricity woes, and whether the government will allow miners to start generating their own power.

The impact to mining and to the broader economy, of further load shedding far outweighs the loss to Eskom of some of its major customers.

Mantashe may also wish to tackle the growing problem of illegal mining, which is costing mining groups and the government billions of rand.

We are only two months into 2020 and there have already been some big moves in commodity prices. The latest factor to impact these prices is the ongoing escalation of the China coronavirus, which is ramping up fears that the spread of the flu-like virus will impact global growth, even if it only slow’s China’s economy a little.

For instance, the oil price slipped to a three-month low of $60 (R898) a barrel last week – the price tends to fall with expectations of lower global growth – while the gold price has drawn support from the virus in its long-term role as a store of value.

The yellow metal was trading 0.28 percent higher on Friday morning at $1 578.36 per ounce, which is the highest price that it has reached since 2013.

The price in dollars was more than 20 percent higher over a year, and the trend seems to be up for now, with the metal likely to gain further traction from the uncertainties surrounding the US presidential elections, the US/China trade talks and an uncertain global growth scenario.

Also benefiting from higher prices last year were platinum miners, with platinum sister metals palladium and rhodium prices rising 54.7 percent and 141 percent respectively during 2019, with both prices continuing to surge ahead last month due to supply deficits.

Tighter vehicle emission standards, with new laws coming into effect in China, and rising demand for renewable energy, are fuelling platinum group metal demand, but it is worth remembering that platinum demand and prices remained relatively flat last year, following a production surplus in the market, so the prices of its sister metals may correct later this year.

Coal prices are low, in line with structural changes in demand and the continuing global drive towards greener fuel, with the spot price at $45.56 a ton on Friday, while the South African thermal coal export price was around $61.37 per ton, well off the $76.03 per ton reached at the end of last September.

Metallurgical coal prices cooled due to less steel production.

So, the 2020 price outlook for locally mined minerals presents a mixed bag, which is normal – commodity prices are notoriously volatile.

One stock that has been punted by JSE analysts quite often last month is Sibanye Gold, which mines gold and is a leading producer of palladium.

Its share price was up 2.1 percent at R38.94 on Friday, this after rising steadily from only around R11 a share last May.

Another company attracting significant interest from institutional shareholders of late is AngloGold Ashanti, on good earnings prospects. It was trading 0.5 percent higher at R297.68 on Friday, already more than 75 percent up from R166.01 last May.

Local investors can easily invest in bullion by buying units in the Absa NewGold Exchange Traded Fund (ETF) on the JSE, which was priced at R207.55 on Friday.

The units are backed by physical gold, which is held on behalf of investors at an annual fee of 0.4 percent of its value.

Another ETF for easy and relatively low cost exposure to the rand price of gold is the 1Nvest Gold ETF, which units had a net asset value of R209.84 on December 31, 2019.

Absa’s NewPlat Exchange Traded Fund offers investors easy exposure to the rand price of physical platinum.

Absa closed at R137.44 on Friday, and had returned 7.08 percent over a month, and 28.8 percent over a year, to that date.