Photo by: Bloomberg
JOHANNESBURG (miningweekly.com) – An unfavourable regulatory environment is likely to result in South Africa’s iron-ore production stalling at 58-million tonnes a year for the next four years, research firm BMI said on Monday.
In an outlook covering the sub-Saharan Africa region’s iron-ore sector, BMI noted that the country would be “the largest and most important source of uncertainty”, as the recent passing of the new Mining Charter would likely lead to higher compliance costs for miners.
BMI warned that further divestments may be on the cards, as the charter imposed stricter rules over black ownership levels and hiked royalty rates, applying further downside pressure to the weak iron-ore production forecast in the country.
Anglo American has already said it plans to sell its iron-ore operations in the country and Ferrum Crescent on Monday announced its exit from the Moonlight iron-ore project, in Limpopo.
BMI has lowered South Africa's regulatory score in its Mining Risk Reward Index, where the country now scores 36.9 out of 100, below the regional average of 37.7.
However, while the South African industry would remain burdened, BMI expects sub-Saharan Africa’s iron-ore production will expand from 93-million tonnes to 103-million tonnes over the next four years.
This, it noted, would be spurred by continued Chinese investment into the region, which would offset the effects of lower global prices, identifying West African producers Guinea, Liberia and Sierra Leone as growth outperformers.
“We expect Chinese miners to be particularly spurred by strong government backing, providing them with a higher risk tolerance than western miners, who will continue to struggle with high debt loads and costs,” it said.