South Africa-based equipment supplier Schwalbe Import & Export is in negotiations with two Africa-based mining companies to secure contracts in July, after a tumultuous 2013, Schwalbe MD Jonathan Betsalel tells Mining Weekly.
“Last year was a difficult year in the mining industry and Schwalbe did not secure any new contracts in the latter part of the year. We therefore resolved to focus rather on maintaining our current clientele,” he explains.
One of the contracts Schwalbe is aiming to secure is for the supply of down-the-hole (DTH) equipment, valued at R500 000 a month, to a Botswana-based mining company. If awarded, the contract requires that Schwalbe supply mostly DTH bits to the company, with the prospect of supplying DTH hammers in the future. The contract can be renewed each year.
The other contract is for the supply of rock tool equipment, valued at R1-million a month, to a South African mining house. Schwalbe will supply mostly hand-held rock-drilling consumable equipment over a one-year period, with the company looking to extend the contract for another two years.
Contractor Woes
Betsalel notes that, since the Marikana tragedy of 2012, there has been a lull in the South African mining industry, which has impacted on mining companies’ profitability.
“Generally speaking, the mining industry has been under a significant amount of strain over the last year. However, we have seen sentiment improving over the last few months and are hop-ing that 2014 will be a better year than the last.”
Betsalel highlights that the gold sector was particularly hard hit in 2013, as evidenced by strikes, a poor performing gold price, electricity constraints and the general increase in input costs as a result of a poor-performing rand exacerbating inflation. “All this resulted in mining houses, predominantly those involved in underground operations, being strained to maintain profitability.
“This, in turn, impacted on the profitability of marginal mines, with some of them being put on maintenance. Exploration projects were also put on hold,” he notes.
Betsalel adds that the price of platinum also dropped dramatically after a brief spike following the August 2012 Marikana tragedy, which culminated in the deaths of 44 people, the majority of whom were striking mineworkers. This price drop, compounded by an ongoing strike in the sector, has resulted in platinum companies struggling to remain profitable.
“To a lesser degree, the drop in the rand alleviated the problem by increasing the rand value of platinum. However, the substantial increase in input costs, ironically also due to a weak rand, and the platinum sector strike have placed South Africa’s gold and platinum sectors under severe distress,” he concludes.