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Trust and confidence key to advancing S African mining

ANDREW VAN ZYL The mining industry needs to prioritise the rebuilding of reserves, the stimulation of new exploration and the process of consolidation

MARCIN WERTZ SRK representatives will provide robust insights into dealing with the range of challenges faced by the mining industry at The Joburg Indaba

29th September 2017

By: Robyn Wilkinson

Features Reporter

     

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With uncertainty reigning in the South African mining landscape, it is imperative that the private sector maintains a positive approach to transformation, says firm of consulting engineers and scientists SRK Consulting partner and principal consultant Andrew van Zyl.

He stresses that mining companies need to continue to highlight the gains that have been achieved, despite the economic pressures, through employment equity, women in mining and company shareholding, while continuing their commitment to find innovative contributions to the transformation process.

“The South African mining industry needs to prioritise the rebuilding of reserves, the stimulation of new exploration and the process of consolidation, where necessary, to emerge from the global financial crisis, and this cannot be achieved without cohesion between the goals of the private and public sectors.”

Transformation in mining will be a key theme at the Joburg Indaba this year, where SRK Consulting will be participating as a network sponsor. SRK Consulting partner and principal mining engineer Marcin Wertz highlights that experts from SRK Consulting present at the event, which will be held at the Inanda Club, in Sandton, Johannesburg, from October 4 to 5, will be using the opportunity it provides for networking with delegates and speakers – sharing experiences and best practice, as well as providing robust insights into dealing with the range of challenges faced by the mining industry at the moment.

SRK Consulting corporate consultant Roger Dixon notes that mining countries in Africa have all been affected by the lower global demand for commodities, adding that this challenge has been further aggravated by troubling political signals in countries like Zambia, where the opposition leader was recently arrested, and the Democratic Republic of Congo, where promised elections are still to be announced. “In South Africa, the recently revised Mining Charter has, moreover, clearly sounded the death knell for any mineral recovery we might have been hoping for; this will both prolong the uncertainty and carry negative overtones for future investment.”

This is particularly problematic for the gold and platinum sectors, with ongoing pressures to improve productivity necessitating some consolidation to reduce costs. Van Zyl stresses that this process ideally needs stability to proceed with realistic and robust valuations, pointing out that the uncertainty hanging over ownership rules will be an unwelcome distraction to these efforts, as stakeholders seek legal clarity on what is permissible and feasible.

The uncertainties in the local regulatory environment, combined with global financial uncertainty, triggered by the massive drop in the oil price, the weakness in Chinese growth and a collapse in commodity prices, also brought exploration activity in South Africa almost to a standstill, says SRK Consulting geology partner and corporate consultant Hennie Theart. He notes that many geologists were retrenched and that drilling and laboratory services were equally badly affected. “This has dampened new business opportunities that advance transformation in mining; however, it appears as if the exploration business is slowly recovering, mainly from work picking up in the rest of Africa. But, this is still far from the previous boom periods.”

SRK Consulting has a global network of offices and Wertz stresses that the Joburg Indaba provides the company with a good opportunity to demonstrate how its expertise and experience can benefit the mining industry, especially new historically disadvantaged entrants and junior miners.

“We will focus our conversations on what differentiates us as consultants to the mining industry, such as our full range of technical expertise across the mining life cycle, from exploration to mine closure, coupled with our over four decades of experience in the industry.”

Pockets of Optimism
Amid the uncertainty in the economy, Wertz also highlights that it is important to note that there are still significant opportunities for mining companies in Africa. An especially encouraging sign for mining in Southern Africa has been the increased activity in the copper industry – which, he notes, is a useful bellwether for the prospects of other minerals.

“Efforts to revive mines in the Prieska area, in the Northern Cape province of South Africa, as well as interest in deposits in Botswana and Namibia, all suggest that developments may be bubbling under the surface. The higher price of manganese has also seen operations in this segment recovering quite strongly.”

Dixon also notes that, despite the rapid development taking place in the renewable-energy sector, South Africa will remain reliant on coal for the near future, necessitating that State-owned power utility Eskom and government find ways to foster the supply from large producers.

In addition, SRK Consulting coal principal geologist Lesley Jeffrey notes that the junior coal sector should not be overlooked, with several small, unlisted and lesser-known mining companies securing small, short-term coal supply contracts with Eskom or selling through traders.

SRK Consulting principal mining engineer Noddy McGeorge also notes that there is notable consolidation activity among junior coal miners, which, while initially focused on supplying Eskom, are now increasingly focused on entering the lower-grade export markets.

“The growth challenge for junior coal miners is that, while they can get an Eskom contract, the contract duration is not long enough to secure bank funding to finance growth. Coal mining is generally a low-margin business and it needs volumes to make it viable.”

On the other hand, larger coal miners are largely still reluctant to commit capital and are, thus, holding off on expansions, with South32 and Anglo American still seemingly undecided on some of their replacement projects. As a result, their exports have been lower than their port entitlements allow.

“Other interesting developments in the coal sector have been the moves by Seriti Resources to take over what were previously Anglo American’s Eskom-tied coal operations, including Kriel and New Denmark, in Mpumalanga, and New Vaal, in the Free State – so there’s some interesting potential there. The development of the Boikarabelo mine, in the Waterberg, will also be significant as this coalfield is gradually opened up,” McGeorge concludes.

Edited by Tracy Hancock
Creamer Media Contributing Editor

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