JOHANNESBURG (miningweekly.com) – The 8.4% year-on-year decrease in South Africa’s mining production in March is not necessarily an accurate reflection of the state of the mining industry, says international law firm Hogan Lovells mining head Warren Beech.

He hopes that figures will have “smoothed out by June or July”, as at least a three- to six-month period is required to get an accurate reflection of the state of the industry.

Statistics South Africa (Stats SA) on Thursday reported that seasonally adjusted mining production had decreased by 3.4% month-on-month in March.

This followed month-on-month growth of 0.5% in February and 1.6% in January.

Subsequent to this, the seasonally adjusted mining production decreased by 2.5% year-on-year for the first quarter of this year, during which ten out of twelve mineral groups reported negative growth rates.

Platinum-group metals (contributing -0.6 of a percentage point), iron-ore (contributing -0.4 of a percentage point), copper (contributing -0.4 of a percentage point) and ‘other’ nonmetallic minerals (contributing -0.4 of a percentage point) were the largest negative contributors.

The March figures, however, were down as a result of a number of factors, including the judgment and appeal against the third iteration of the Mining Charter, which is expected to be released by the end of this month, global demand and the US-imposed tariff hike on steel imports.

Further impacting on the mining industry’s growth and development is regulatory and policy uncertainty, international demand, and employees and communities starting to become more active and treating the mining industry as replacement municipalities, said Beech.

Additionally, Beech warned that growth is dependent entirely on the alleviation of the regulatory uncertainty surrounding the Mining Charter and the impending amendments to mining laws.

“If we get those sorted out, then the levels of positivity will be back, and production is likely to increase as well.

“Under the leadership of former Mineral Resource Minister Mosebenzi Zwane, the Mining Charter was problematic because it was not a negotiated charter and, because there was no certainty around the charter, investors were particularly concerned,” Beech told Mining Weekly Online.

However, he highlighted that since the election of President Cyril Ramaphosa and the appointment of Gwede Matanshe as the new Mineral Resource Minister in February, a governmental commitment to have the Mining Charter resolved by the end of May increased optimism in the industry.

“But, it’s important to note that when Mantashe announced that he was going to appeal against the ‘once empowered, always empowered’ judgment, it put a negative spin on the commitment. The perception is that the Mining Charter is now going to be delayed again,” Beech noted, adding, however, that the industry remains hopeful for the May release of the charter.

Referring to the US-imposed tariff hike on steel, Beech explained that it impacts negatively because as soon as the global demand for steel goes down, South African output, and specifically iron-ore, is affected.

“Anything US President Donald Trump does in relation to steel, impacts the global steel manufacturing and construction industries. And, whenever global demand is impacted on, it impacts on us [South Africa] and our iron-ore operations, leading to materials being stockpiled or a production reduction,” he explained to Mining Weekly Online.

As soon as production is affected, it has an impact on job and contract stability, increasing the “snow ball effect”, he warned.

“It has a ripple effect and people don’t always realise that the ripple effect is very real in the industry, and it doesn’t just impact on the mining industry, it impacts on all the related industries,” Beech lamented.

Mining is not just mining on its own, he explains, it supports a “tremendous amount of satellites industries, such as manufacturing and construction.”

“Critically, mining is not about each employee only in the mining sector. Every employee that loses their job in the mining sector (which employs about 350 000 people), has an impact on at least eight to ten other people that are supported by a single mineworker. The additional knock-on effect is that the smaller companies that support the mining industry - transport companies, manufacturing companies - are all then impacted.”

In simpler terms, if the mining sector is not healthy, then the other sectors associated to it are also negatively impacted.

While negative sentiment tends to surround the mining industry, Beech explained that all is not lost, considering that moving forward further growth, development and contributions towards transformation are expected in what is a resilient South African mining industry.

“My personal view is that the industry is still a meaningful contributor. While this won’t necessarily take place in the next two or three months, we’ll certainly see this towards the second half of 2018 when the industry will be in a position to contribute meaningfully again.”