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

Moodley: A number of small mining companies are entering 2014 under extreme financial pressure and some may not see out the year.

Creamer: That is pretty clear. The companies I am talking about are those that have come into South Africa as foreign investors, they’ve raised capital in Canada and Australia and also dual-listed some of them in South Africa and they have ploughed investment into our country, particularly in coal and those investments are turning sour.

One of them is Forbes Coal, listed in Toronto, and it has told the Toronto Stock Exchange unashamedly that they are in serious financial difficulty and they have even asked for financial hardship exemption.

We also have in Sydney, Continental Coal saying that they are going to stop trading their shares there, but perhaps we will go into administration, that means that you will have someone else driving your company because you are in such financial constraint.

Both of these companies are mining in South Africa, so there is going to be repercussions and we see that some of the smaller companies CEOs haven’t had pay for months, they have sacrificed their pay.

Some of the have even put in personal funds to keep things going. Ask no questions, the boards will have to decide later how they are going to compensate these people. You have executive directors going on halfpay.

So there is quite a lot of angst at the small level and it is reflecting the big level as well, because you have companies there, which are cutting back on projects. They are not able to raise the funds they want to.

Traditional sources are funding from banks have dried up. Banks are shying away and you can’t go on to the stock exchange and raise equity. People just don’t want to give money to mining particularly in South Africa, but mining in general, when the commodity prices are down.

Moodley: What did they do? Chris Heart was tweeting about this matter this morning saying that smaller companies or marginal ones at least will either have to shut down or restructure to cut costs.

Creamer: The buzzwords are recapitalisation and rebranding. You say that you have got to get more money and when you do you want to change the name of your company, because some of the companies have already suffered reputation damage that doesn’t actually encourage investment. So, they want to start again, as it were, that is how bad things are.

Moodley: That is something that the big companies can’t do, like the Lonmins and AngloGolds.

Black mining juniors are eyeing the coal assets of broke foreign-listed entities.

Creamer: One person’s poison is another person’s meat and where some fall down others see an opportunity. Interestingly, because of the unique situation we have got here with Eskom, and because Eskom and the Minister are demanding that black entities are coming in to supply coal are majority black owned. It must be 50% plus one share.

That is what they are demanding. Suddenly you see companies, even smaller listed entities that may not have black partners now working furiously with black juniors to say that they can then have a black majority company, either at asset level or at trading level. These people can snap up these aspects, which are stressed.

They are not bad assets and what has happened is that a lot of investment has gone into them. People have drilled into the ground and they have found out how much coal is there.

Exactly what can be offered is there and they are financially stressed and they want to leave the country. So, this is an opportunity for black juniors to climb in boots and all and you can see the furious activities going around in that space.

Moodley: A South African company is studying the feasibility of producing steel in Botswana for export into Africa.

Creamer: Now we have a company called Sable Platinum, note the platinum, considering going into steel manufacture in Botswana. That gives you an idea of how stressed the platinum is. This is real diversification.

You have this company, which listed under the name Sable Platinum on the JSE, asking its shareholders and its shareholders approving that it changes it name to Sable Metals and Minerals and starts putting platinum right on the back burner, because there is just no prospects for it and they can’t raise funds for it.

Going into vanadium iron-ore in South Africa will be the place where it gets it cash flow, so it is completely away from what it originally intended. So looking across border now, because people are getting very keen on Africa and saying can we do something in Botswana. They found a partner there who has a stockpile dump site with plenty iron in it and they want to extract that iron.

They were thinking at first to making pig iron, because once you get inland and you’ve got logistic costs you think of adding value to whatever you are doing.

Now they are saying that it looks more feasible to go one step further and manufacture steel rebar that can be exported into Africa.

So it just shows you that companies have to be off the mark to change the direction so that they can take advantage of what is an opportunity in Africa now, but totally out of the original thinking when they listed on the Johannesburg Stock Exchange.

Moodley: 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.