Every Friday morning, SAfm’s AMLive’s radio anchor Xolani Gwala speaks to Martin Creamer, publishing editor of Engineering News and Mining Weekly. Reported here is this Friday’s At the Coalface transcript:
Gwala: Patrice Motsepe’s African Rainbow Minerals is impressed with the way that countries like Papua New Guinea and Chile woo foreign investors.
Creamer: Patrice was speaking at his results presentation and his results for the half-year were 30% down. Be that as it may, he said South Africa stands to benefit greatly if it can succeed in instilling new confidence in global investment.
The points he makes is that if you go to countries that are really doing well, countries that create the most jobs, lift living standards to the highest level, improve literacy, provide the best health facilities, those are the countries that offer global investors the highest degree of confidence.
This company African Rainbow Minerals is focussed in South Africa and Africa, so it is quite strange that they should be looking into the wider world. They are in iron-ore, manganese, nickel, platinum and coal. But, when it comes to copper, they are outside of South Africa and that is what has brought them into contact with the governments of Papua New Guinea and Chile, which are copper producers.
Now, Motsepe is saying that when you go to a small developing country like Papua New Guinea, the access that you get to the Prime Minister and half of his Cabinet, the red-carpet treatment, really encourages investment. Also, he has had tremendous interface with the Finance Minister of Chile.
South Africa can perhaps model itself on some of these countries when it comes to wooing investors, because we really need that investment and I’m glad that the budget is investor friendly.
Backing Patrice up on this is Harmony Gold’s Graham Briggs, of course, Patrice Motsepe’s ARM is the biggest shareholder in Harmony Gold and that is why it is looking at Papua New Guinea, because Harmony Gold has got a very good deposit there.
It is a copper and gold deposit and, of course, Harmony is interested in the gold side and ARM is interested in the copper segment of that. So, again Briggs says the transparent, open and down-to-earth approach of these governments is encouraging investment, but they dig firmly when it comes to environmental protection and safety, otherwise they tend to roll-out the red carpet, which is what South Africa needs.
Gwala: Three large South African gold mines are receiving ongoing investments that will set them up for another half-century of high-volume gold mining.
Creamer: We often look at the holding companies the big gold companies that are listed on the Stock Exchange. We don't often look at their assets and when you at the Mponeng mine on the Far West Rand, the world’s deepest mine, and we look at Moab Khotsong, you see that the investments are continuing into these operations at a very encouraging level that will take us into another half-century.
hat half-century is going to be far better then the half-century we’ve come out of, because the new approach that has been adopted to mining even though we are so deep at 5km. The plan is to take out a third of the material, that two thirds that we have been taking out has been non-gold bearing materials.
So you leave that behind you become so much more efficient by just bringing out that third that you can actually mine in a fifth of the time. The development rate through tunnelling boring that they are planning is more then six-times faster then what we have. Instead of three metres a day, you will do 20 metres a day. All this efficiency is very important in order to make that feasible to mine at those depths.
The big point that they are making now is that jobs will not be lost in any serious way when they move to this new technology. They will use natural attrition to lower their numbers in the short term, but in the long term they are saying that they are going to employ more people. That is a very big important consideration.
When you look down the road at South Deep, only 45km south-west from where we are sitting here in Auckland Park, that is already a mechanised mine and R36-billion has been invested in there, so that is spent. There is only another R4-billion, which within relation to the R36-billion is a small amount that is planned over the next couple of years and that will take us to 700 000 ounces of gold a year.
If the technologies work, Mponeng and Moab Khotsong will unlock 100-million ounces, so we are looking at what we think is an industry on its last legs, but it is certainly, if things pan out, another half-century of life, in a much better era.
Gwala: South Africa’s new research-and-development tax incentives are expected to boost minerals beneficiation.
Creamer: The tax incentive equates to a saving of 14% on every rand of identified research-and-development (R&D) expenditure, and the beneficiation of mineral wealth is now included.
It has received a boost because of this inclusion of the total R&D package. So taxpayers can claim an additional 50% tax deduction on R&D expenditure from the date that they have got pre-approval from the Department of Science and Technology.
So, you will go for pre-approval from the DST and the department has indicated that it will turn-around the application in three months. Then on the revenue expenditure side, a taxpayer can claim a deduction of up to 100% of its expenditure incurred relating to R&D that foots the bill. Then an additional 50% can be claimed if a pre-approval application is successful and was submitted on time.
On the capital expenditure front, a taxpayer can claim an accelerated allowance 40% in the first year and 20% in the subsequent three years. So, this now also applying in the mineral space can dovetail well with beneficiation, which South Africa has been struggling to get moving forward.
The entities that are in a taxpaying position will realise the benefit of R&D tax deduction sooner then any companies that are not in the taxpaying position. It looks like this can float a lot of boats and it is something that is there and ready to be plucked.
Gwala: Thanks very much. Martin Creamer is publishing editor of Engineering News and Mining Weekly, he’ll be back with us at the same time next week.