Mining companies, like most industries, will investigate all methods of generating capital following the loss of trade caused by South Africa’s three-week lockdown to limit the spread of Covid-19, says South African Institute of Auctioneers (SAIA) chairperson John Cowing.

Speaking to Mining Weekly hours prior to the lockdown, which started at midnight on March 26, he said many auctioneers had rescheduled several auctions to take place once the lockdown ended at midnight on April 16.

Therefore, Cowing expected an “enormous” number of auctions to follow, with surplus mining asset auctions generally accounting for 20% of market share.

“The auction industry will unfortunately come to a standstill during the lockdown. Generally, buyers wish to view assets prior to buying at auction and also want to be able to collect their assets immediately after the sale event, both of which are impossible due to the lockdown period.”

Cowing forecast that the sales of surplus mining equipment by mining companies would be negatively impacted on by the measures implemented to address the Covid-19 outbreak in South Africa.

“We expect to go through a recessionary period, which generally brings more assets to market, but not more purchases.”

However, Cowing added that there would also be some bargains for those buyers fortunate enough to have excess capital available to buy surplus assets.

The mining commodity industry would be greatly affected by the crisis; Cowing said gold, on which South Africa built its mining industry, should remain a safe bet in these uncertain times.

However, despite the platinum industry enjoying renewed interest of late, demand for the metal ­– used in the production of catalytic converters – is expected to reduce on the mothballing or closure of automotive manufacturers’ production facilities amid the Covid-19 crisis, negatively affecting the platinum price.

“It will be interesting to see the impact on the mining market, but South Africa’s actions towards the Covid-19 outbreak locally came at the right time. If government can continue to display and/or enforce this type of discipline, we may come out of this quicker than some of the other countries that were slower to react, particularly those in Europe.

“Hopefully this event will be a small blip in our history and not a long-term problem.”

Activity Before Lockdown

Amid the commodity crunch over the last decade, numerous mines had looked to raise capital from surplus and redundant assets, as well as to become more efficient in managing their reverse supply chain, Cowing said.

“Therefore, mines are taking greater interest in asset management and are bringing surplus assets to market more regularly and sooner than they would have previously. Certain mining companies are also reducing their historical footprint to manage their mines more efficiently through footprint reduction programmes.

“So, we have certainly seen an upswing in the number of mine ‘clean-up’ sales taking place.”

While operating mines have historically held annual or biannual live or online auctions of surplus assets, there were certainly an increased number of online auctions leading up to the local lockdown, noted Cowing.

Because of the Covid-19 outbreak, online auctions had been “pushed into the forefront of the auctioneering industry”, he added, stating that he believed that operating as a live auctioneer solely would be significantly more difficult going forward for those auction houses that did not provide online solutions for clients.

“Online auctions started in South Africa in 2004 and there has been a steady increase in auctioneers using this format, as it has distinct advantages over live auctions.”

Cowing said there had been a natural progression towards online auctions in South Africa as they opened auctions to a wider audience of buyers and enabled them to view assets online, eliminating the need to travel to site.

Meanwhile, with auctioning the only method of sale that enables the seller to sell equipment as is, it is a “great way for sellers to take assets to market without fear of comeback”.

However, many mining assets on auction come out of operation with no faults, with buyers able to view the assets prior to buying and make their own assessment about their condition, Cowing highlighted.

Buyers from around the world can participate along with local, national and regional competition.

“Tens of thousands of assets are sold by auction in South Africa across various industries with few issues. Last year, fewer than 30 complaints were received by our institution about member auctioneers, and this number is getting progressively less, owing to information provided by the institute.”

Cowing emphasised that SAIA prided itself on acting as the mediator for sellers, buyers and auctioneers.

“Our members are proud to be part of our esteemed organisation and sign up to a strict code of conduct.”

Cowing suggested that buyers, before transacting with auctioneers, ensure that they are members of SAIA, which is a voluntary organisation. The public at large should be wary of buying assets from an auctioneer who is not a member and, therefore, has not signed up to SAIA’s code of conduct.

“We want buyers to be careful. When people are short of money, fraud creeps into the market. Of late, we have seen people purporting to be auctioneers or selling assets at ridiculously low prices purportedly on behalf of credible companies or banks and requesting the payment of deposits to secure the lot.”

Ultimately, the scammed buyer finds out he/she has been defrauded by a scam auctioneer.

Although this fraudulent activity, which had only recently surfaced, was prevalent only in the motor vehicle auction space, Cowing urged caution when procuring assets across all industries.