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On-The-Air (04/07/2014)

4th July 2014

By: Martin Creamer

Creamer Media Editor

  

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

Kamwendo: The Ivory Coast, with its new investor-friendly mining code, is stealing a march on the rest of Africa as an investment destination.

Creamer: As far as an investment destination is concerned, we have got to look at the competitive juices in Africa. It is always important for us. We see the Ivory Coast is not just about cocoa and soccer, they are doing pretty well at soccer as well, but the thing is that they have developed a mining code with the mining industry about which the mining industry is very enthusiastic. We had in Johannesburg this week the London-listed Randgold Resources head Dr Mark Bristow. He is a South African who started his company down the road. I was there when he started it in 1995. He has now built five mines in Africa and he is looking to build a sixth mine. Where is he looking? One of the places is Ivory Coast, because he says he is so impressed with this mining code. It is so investor friendly and also, it has got good infrastructure, very professional bureaucracy and it is under explored. So that could be where he is searching for 5-million ounces where he wants to put a mine on a 5-million ounce deposit and he wants to get a 20% return on a gold price of $1 000 an ounce. He is preparing for that situation. Again, he is seeing West Africa as a whole. The way they are harmonising their mining codes there they are attracting their investment to a far greater extent than we are. We have to learn these lessons, because our own MPRDA, which is the Minerals and Petroleum Resources Development Act, has been amended many times, but it still hasn’t been signed in to the law. This just creates a whole raft of uncertainty. Of course, we are still in the post-strike era. We have got to start looking at beginning again and attracting that investor capital. Capital is scarce and people with the capital are scared. So, you have got to make them calm and hopefully we will begin doing it soon.

Kamwendo: The current low gold price is bankrupting South Africa’s once proud gold-mining industry.

Creamer: The Chinese are now the biggest gold miner. Only seven years ago we were the biggest gold miners. We have now fallen behind Australia, the United States and we are even below Peru. We have gone into sixth place. With this low gold price in the $1 300 an ounce range it is not only us, but the whole world is really fundamentally broke when it comes to gold mining. The weak rand is not helping us as much as we thought. Again it was Dr Mark Bristow at the Randgold Resources meeting this week who said at $1 300 an ounce the world gold industry is bust. We are back into that situation where we have been producing too much gold, which has pushed the price down. We had the same situation in 1995 where everyone was hedged, that means that they sold gold forward at a price. We ended up pushing the price down to about $250 an ounce. We had to come out of that in 2001 where we said no more hedging. Then off went the price again. In days gone by in South Africa, we could produce a lot of gold, because if the jewellery market didn’t take it, then the central banks took it. That doesn’t happen anymore, so the only way this is going to correct now is for the market forces to take place, for people to start producing less gold. Because of the situation when it jumped up to $1 900 an ounce they heaped a lot of risk upon themselves. They are now getting rid of that risk and that means that they are not exploring and developing new mines. So we should get back to the point where supplies are short, because we know demand is there. We see it in China, but exactly when that takes place, one needs a crystal ball. In the meantime, we struggle and you can say we are under water when it comes to gold mining in South Africa.

Kamwendo: Energy from coal gas rather than the traditional solid coal is on the way in South Africa.

Creamer: We were talking about mechanised mining. This jumps over mechanised mining. It’s chemical mining. You don’t need people underground. This is happening in the Free State, at Theunissen, where the company Africary is planning to be our first underground coal gasifier. So you just have to drill down vertically, drill across and you actually ignite the coal underground. You set the coal on fire in a controlled way underground. The gas that it gives off you pipe up to the surface. That gas has got the energy you are looking for. You don't have to then transport the coal and you don’t have the ash on surface from burning it. You’ve got this gas and you then use that to generate electricity. These guys are thinking of 50 MW to start with on this coalfield in Theunissen, in the Free State. That coal is too deep to mine anyway so it is stranded coal. You then get the benefit of this energy coming to surface through chemical mining. You can look at several things, because you know that once you’ve got that syngas and you can do what Sasol is doing. Sasol has been using that syngas for the last 50 years to make petrol, diesel and chemicals. Eskom is also looking for baseload so these people are going to then offer this 50 MW as a start to Eskom so that you have got that baseload power coming through. Interesting move this underground coal gasification not only in South Africa. Chinese already doing it. In Canada they are bringing in legislation to facilitate it. It is an interesting way of getting that energy from the coal without the burden of having to mine the coal send people underground and then transport that coal to surface at high cost and also then have to do something with the ash once you’ve burned the coal.

Kamwendo: Very interesting and also just harping back to what Clive Ramathibela was saying in business about automation and things becoming automated. It just opens up so many avenues and it speaks to again us thinking about what it is that our children are studying. Are they actually equipping themselves to be in prime position for jobs with regard to all these technological developments that are taking place not only in mining but all sectors. It is not only a South African thing, it is going to be a global phenomenon.

Creamer: Correct and the labour intensity is moving out of this scene and one wonders what next we will do with our people.

Kamwendo: 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.

 

Edited by Creamer Media Reporter

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