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On-The-Air (22/08/2014)
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22nd August 2014
Updated 1 hour 15 minutes ago
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AMLive anchor Sakina Kamwendo on Friday presented another Update From The Coalface with Martin Creamer, publishing editor of Engineering News and Mining Weekly.

Kamwendo: State-owned Transnet and Eskom have come to the party for black-controlled coal miner Exxaro.


Creamer: The two state enteprises came to the party for black-controlled Exxaro in the months to June 30.  There’s been a lot of criticism on the State-owned enterprises, particular Transnet, because when you’re a coal miner you need transport to get to the global markets and often you haven’t got that, but when it came to the last months with this Exxaro, the JSE-listed company, Transnet really pulled out all the stops.  They brought in 86 trains which was 65% more than this time last year in the 6 months to June 30. That is a tremendous boost for Exxaro, because its big customer is Eskom, but you don’t get the high prices from domestic sales, you get your high prices from exports. If transport can’t get you to that port, then you’re in trouble, but in this six months Transnet really did its job so you can see the fortune’s turning. On the Eskom front, Exxaro did its job at Medupi, dug the coal out of the ground and got it to Eskom, but Eskom couldn’t deliver the power station. What happens to that coal?  I think they’ve been patient and put South Africa first in negotiating carefully, but finally, Eskom have come to the party, and they’ve done the deal, they’ve got to take or pay and the coal is starting to go through to Medupi, which is also a good sign because it gives us the idea that Medupi will be coming on line soon.  So those are two good efforts from the State-owned enterprises which normally come in for a lot of criticism. When you look at Exxaro, they’ve also got an employee ownership scheme and again they declare dividends which means money flows down to 7 000 employees, and they’re looking to being involved in power station development themselves at a new mine they’ve got in Limpopo. They are going to supply coal to what we call an IPP, which is an Independent Power Producer, which is a base load power producer. Some interesting activities on the private sector front when it comes to energy generation and then Exxaro opening a big mine in Belfast and looking to open in Australia.

KamwendoSouth Africa is being positioned as a key services centre for the new company that is being spun out of the huge BHP Billiton, the world’s biggest mining company.

Creamer: You know, a lot of criticism came BHP Billiton’s way when it looked like they were leaving South Africa in the lurch, but not so. BHP Billiton, the worlds biggest company, will remain in Johannesburg.  It will be listed on the Stock Exchange. It will still drill in deep waters for oil and gas off the West Coast, but it’s saying, “we need to hive off some of those assets which are in South Africa, which don’t get enough management attention, which don’t get enough capital.” So, they’re hiving off the aluminium, the manganese and also the energy coal.  From that point of view, it’s fantastic for South Africa if more attention can be given to these assets, because it represents only 4% of BHP, but in the new company which is being formed which is only being called Newco now, and it will be listed in Johannesburg. The South African assets will represent a third of the new company. We will have at least two members, two South Africans on the board, it will still be a global company and the local operations here are giving us a sweetener. This is in the form of this new services centre.  Look at BHP, they’ve got a massive services centre in Kuala Lampur, they’ll mirror that and put it in South Africa and there’ll be 200 skilled jobs here, it’ll mean payroll, it’ll be IT support.  It’s a very nice sweetener that they’re offering under Newco, this new company is going to come in here, it’s going to push our assets in South Africa.  Aluminium, which hasn’t really got enough support, manganese, and also energy coal where they see some growth potential.

Kamwendo: South Africa’s gold mining companies are struggling under the burden of the low gold price, which is showing no sign of recovery.

Creamer: South Africa’s gold mining companies are struggling under the burden of the low gold price which is as you say not showing signs of recovery and you know we’ve had these comments in the past that if it’s below $1 300 an ounce, the company’s a bust. In South African terms we do get a bit of a relief from the weak rand, because it translates into a higher rand price, but of course that is a fools paradise, because there will be a time where inflation will take over and we will be hurt.  You can see that Harmony had to put on care-and-maintenance its Free State Target 3 shaft that’s gone on care and maintenance and at risk are 1 500 jobs there.  That is now an asset that’s bleeding cash and then we see Gold Fields, with South Deep, having to change its mechanised mining, there were a lot of Australians in there to try and help, they are having to rethink continually, because things are not going well and at the same time you are having to work under this low gold price, which is a double whammy.

Martin Creamer is publishing editor of Engineering News and Mining Weekly. He’ll be back At The Coalface at the same time next Friday.

Edited by: Creamer Media Reporter

 

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