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On-The-Air (06/11/2015)

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6th November 2015

By: Martin Creamer

Creamer Media Editor

  

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Every Friday morning, SAfm’s AMLive’s radio anchor Sakina Kamwendo speaks to Martin Creamer, publishing editor of Engineering News and Mining Weekly.  Reported here is this Friday’s At the Coalface transcript:

Kamwendo: Desperate to cut debt, mining companies are resorting to a new phenomenon called ‘streaming’.

Creamer: We used to hear about hedging where they would cover themselves forward by selling their product forward at a fixed price, but that was out of the ground, the metals and minerals where already out of the ground when they sold them off. The new phenomenon is streaming, because they have to get the money far more urgently.

They actually do the deal where they get money for their metals and minerals in the ground while it is still in the ground and they don’t even give a firm date when it is going to come out of the ground. This is a quick financing arrangement and we saw a deal with Glencore this week where Glencore did an arrangement where it sold the silver in its mine in Peru.

It has a stake in a copper mine in Peru, which also has silver and it has sold that off to a Canadian company Silver Wheaton and got $900-million upfront and will get more along the line. It is very interesting to see that a lot of companies in the mining space need cash quickly are going for streaming in order to make sure that their commitment isn’t huge, because they are not saying that they will give the metal and mineral in a specific time, but they are getting cash, which is satisfying their shareholders wanting them to reduce debt in the case of Glencore.

They are going to do a second deal, which they are going to announce before the end of the year. We see a lot of these streaming deals going on.

Kamwendo: Mining companies in Africa are creating agricultural entrepreneurs around their mines.

Creamer: This is fantastic, because this whole initiative is being achieved by a South African who set-up his company Randgold down the road from our desk here in Selby and put it on the London Stock Exchange and the Nasdaq in New York. One of his key passions is that he must create sustainability around his mines. He is saying that mines have a finite horizon, agriculture goes on forever.

So what they launched last month is an agricultural college at the Loulo-Gounkoto mine in Mali, where they are going to put 100 students trough that and turn them into farmers over three years and then equip and fund them. What they are finding is that they are doing this around all their mines now, so that it gets a lengthy horizon.

They are also linking this to funding and micro-funding as well. They are saying that what is astounding is that there is no bad debts. This money keeps being paid back with the interest so you can keep putting it back into the system. They are so encouraged that is why they set up this agricultural college now and they are seen as an integral part of their business.

I am wondering why we don't see more of it here in South Africa, because our mines have had that through Johannesburg Consolidated Investment in the old days, they used to have a link with agriculture, which was sold off by Brett Kebble. He said it was not core, but why are we not doing more of it?

We know there was an opportunity at a very problematic mine at Grootvlei in Springs where there is acid-mine drainage where the is water that is polluted and proposals where put in to use that water for agriculture and some official at the Department of Water Affairs said no, because they are not creating potable water.

Now we see the Department itself is realising to create potable water is very expensive. They are putting some grey water in to the Vaal themselves. So, that could have been going on in agriculture. Now at this drought period we could have already had a model for how you use this polluted water to get yourselves some food security and to give jobs.

Kamwendo: The Ivory Coast is being hailed as the Africa’s best mining investment destination.

Creamer: This is something we should realise that people could go elsewhere to mine. We can see that we have got a bit of a finite horizon here with mining at the moment, because there is just no exploration going on, there is no incentive to do exploration. None of the incentives that they have in Canada with the flow-through scheme.

Again an official in the National Treasury is saying no they are not going to do that. We wonder why these officials can put these brakes on so firmly, because it affects so many people.

But, in the Ivory Coast they are opening the door and we see that Randgold again going in there, boots and all, with the biggest-ever exploration programme using the highest technology available.

Kamwendo: 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.

 

Edited by Creamer Media Reporter

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