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Chamber looks forward to years when platinum Mandela coin gains pre-eminence

Mining Weekly Online’s Martin Creamer questions Chamber of Mines CEO Roger Baxter on efforts to assist the price-hit platinum mining sector. Photographs: Duane Daws. Video: Nicholas Boyd; Video editing: Lionel da Silva.

30th May 2017

By: Martin Creamer

Creamer Media Editor

     

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JOHANNESBURG (miningweekly.com) – The Chamber of Mines of South Africa is looking forward to the years when a platinum Mandela coin gains pre-eminence globally, emulating South Africa’s great success with gold coinage.

This month’s launch by the UK’s Royal Mint of its first-ever platinum bullion products has rekindled hopes that the South African Mint will wipe the dust off its plans for a platinum coin that bears the image of the late, great and iconic South African hero, Nelson Mandela.

More than 50-million Krugerrands have sold since their launch 50 years ago, making this gold coin the most successful bullion coinage in the history of humankind – more than double any other bullion coin in modern history, Chamber CEO Roger Baxter commented at the chamber’s latest annual general meeting (AGM). (Also watch attached Creamer Media video).

The Krugerrand was the brainchild in 1967 of the Chamber of Mines, the South African Reserve Bank, the Finance Ministry and the South African Mint.

“I look forward to the years when a platinum Mandela coin will gain pre-eminence and prominence in the global market place,” Baxter said.

In response to Mining Weekly Online at question time, the chamber CEO revealed that platinum leadership is engaged in constructive discussion on ways of boosting platinum demand, at a time when 50% of the platinum sector is lossmaking at current prices.

“The key is the creation of demand and the partnerships around demand, and that’s why even at the chamber we’ve installed our first platinum fuel cell,” he added.

The 100 MW baseload platinum fuel cell, Africa’s first, is proof that the technology works.

It makes use of gas from Mozambique's Pande gasfields to generate electricity for the chamber and Baxter made the point that greater methane gas and shale gas activity in South Africa would increase the chances of a platinum-using hydrogen economy developing in this country.

Ironically, chamber members have always turned a blind eye to the gas potential of the Free State, where blinkered gold mining companies drilled for gold alone and bypassed the province's methane and helium endowments.

South Africa's State-owned Industrial Development Corporation has just provided R218-million in loan finance to support the further development of a natural gas resource in the Free State, through the establishment of a 107-km pipeline network and gas processing facilities.

Meanwhile, the 1 000-year-old Royal Mint has stolen a march with the launch of 500 g and kilo platinum bars as investment-grade precious metal and is now scheduled to bring out a 1 oz ‘Queen’s Beasts Lion of England’ coin, the first platinum coin to be launched in the popular heraldic series.

A platinum mining and refining major revealed to Mining Weekly as long ago as September 2015 that it was providing full technical support to the South African Mint on the development of a platinum coin and, in a separate initiative, on the feasibility of platinum being held as a reserve asset by the South African Reserve Bank and potentially other global central banks.

On platinum’s supply and demand fundamentals, Baxter said there had been a lowering of output in South Africa over the last five years,with data on platinum's deficit position available on the website of the World Platinum Investment Council.

“The fact is the industry is struggling because it’s been affected by community protests and in particular last year, many inappropriate Section 54 safety stoppages and we’re dealing with those and engaging with government and we’ve made progress in those areas,” he added.

As noted at the chamber AGM, mining’s many linkages have enabled South Africa to become Africa’s most industrialised economy by far.

The industry is also a major contributor to government coffers, last year contributing R304-billion towards South Africa’s gross domestic product (GDP), representing 7.3% of overall GDP.

“We’re starting to see some green shoots,” Baxter said.

In 2015, the industry made an aggregate loss of more than R30-billion as it grappled with cost pressures, falling global prices and production challenges, including the negative impact of inappropriate Section 54 safety stoppages.

In 2016/17, the green shoots of recovery, spurred by an improvement in some mineral prices has helped provide some recovery to the sector, although some components are struggling. At current prices over half of the platinum sector is marginal or lossmaking, which is a significant challenge for the country. 

If the indirect multipliers and induced effects are considered the overall contribution to GDP is about 18%.

Mining directly contributed R93.3-billion to fixed capital investment last year.

“Unfortunately, in the last two years we’ve seen slight dips in growth in investment, in other words, declines overall in aggregate investment levels; and that’s been because, in our view, there are certain outstanding issues, specifically around investor confidence, legislation and the Mining Charter, that have been holding back investments and that need to be resolved,” he said.

More than R3.7-billion was paid in the form of royalties and R12.5-billion in taxes were paid to the South African government.

The taxation contribution does not include the R6-billion contributed to skills development or the other levies and tax contributions the industry makes to the country.

Mining remains a significant contributor to employment, with 455 109 individuals employed directly by the sector at the end of 2016, down from the 525 000 average employee level of 2004.

“What’s encouraging is that the rate of decline in employment levels is slowing, which is indicative of the industry stabilising at the same time,”

Mining accounts for 1.2-million people employed in the economy on the multiplier effects of the industries that supply mining and the downstream industries that use mined products.

This represents just over 5.4% of all employed nationally. In total, these employees earned R120-billion in 2016, and contributed around R18-billion to the fiscus in terms of pay-as-you-earn tax.

Total employment in the economy attributable to mining is about 1.3-million people, demonstrating the huge multiplier effects of mining. 

“Those green shoots of recovery are there but as you know, green shoots can always get frost bitten and it is incredibly important that as a country we do everything possible to make sure that we engender the climate necessary for promoting confidence, because it is confidence that drives investment and investment that drives growth.

“Our definition of higher, inclusive growth is exactly the same as the definition of radical economic transformation,” said Baxter.

In the year ahead, the chamber is committed to making further progress on transforming the industry, continuing to improve health and safety in the industry on its road to 'zero harm', getting a final charter that works, finalising pragmatic legislation, and making progress on labour law amendments, legacy issues and modernisation.

Outgoing chamber president Mike Teke, who served three-and-a-half terms, says that more than five-million people are directly dependent on mining.

“Together we must acknowledge the good and the bad of our past and plan for a better future. The mining industry today is not what it was in decades gone by, but it is not yet all that it can be,” Teke added.

The 128-year-old chamber is in the process of rethinking its identity and name as a way of establishing a new beginning for itself as a more cohesive and inclusive organisation that offers a 'win-win' deal for all.

Edited by Creamer Media Reporter

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