Overcapacity to lead to renewed focus on productivity
The issues contributing to the continued fall in...
According to Statistics South Africa, gold contributed 3.8% to GDP in 1993, dropping to 1.2% in 2015.
The issues contributing to the continued fall in production include the increasing depth of operations, continued declines in productivity, ageing infrastructure and falling gold grades.
With increased travelling times for workers to reach work areas, the actual amount of time spent on production has diminished.
Research conducted by the Chamber of Mines showed that if there is no substantial change in the mining methods used, local gold mining could cease in 2033.
The issue of productivity in mining is not confined to just South Africa. On 31 December 2017, after 107 years of operations, Porcupine Gold Mines’ Dome underground mine in Ontario, Canada, ceased operations, with low productivity cited as a factor it its closure.
Likewise, the issue is not solely a concern for gold miners. Worldwide mining operations were as much as 28% less productive in 2015 than a decade ago, according to McKinsey research.
Furthermore, it also has a knock-on impact for those businesses supplying equipment and services to the industry.
“The focus right now is not on capacity. We are not building a lot of new plants. What we are more focusing on is the productivity part, and helping our customers – earning more money.
“There is an ongoing consolidation in the market, and also a focus on actually starting to earn money, because the productivity, especially in the mining side, has been sacrificed for years over capacity.
“Three years ago, four years ago, it was mainly about capacity,” said Søren Grubbe, VP of Supply Chain, FLSmidth.
“Now there's overcapacity. Now we need to take the other approach and say, we need to optimise what we have.”
Some within the mining industry have long embraced this approach, optimising the resources already available.
Productivity of workers at Coal India has doubled in the past 10 years.
The company now produces 50% more coal with two-thirds of the manpower 10 years ago, thanks to higher utilisation of machines.
According to the Coal Controller of India, output per shift — the quantum of coal each worker producer during a single shift — at the state-run company has increased from 8.6 tonnes for opencast mines in 2007-08 to 16.57 tonnes in 2017-18.
During the same period, the company's manpower reduced from 445,000 employees to 310,000.
Coal India's average productivity per employee has increased to 1,787 tonnes a year from 821 tonnes.
The company, however, is very much bucking the prevailing trend. Productivity, on both a volume and cost basis, has been declining significantly in the mining industry since 2000, according to EY.
EY research also reveals that mining labour productivity in Australia has declined by about 50% since 2001, by nearly 30% from 2009 to 2012 in the US coal sector and by an estimated 35% since 2007 in the South African gold sector.
With this in mind, the need to refocus on productivity is more pressing than ever.
Gerald Group resolves iron ore dispute with Sierra Leone
Gerald Group, the US commodity trader, will pay Sierra Leone $20mn and cede a 10% stake in an iron ore project as part of the resolution to a nearly two-year dispute that led to the shutdown of production, the two sides revealed.
Gerald's wholly-owned subsidiary SL Mining filed for arbitration in August 2019 over a royalty payment dispute and suspended the Marampa mine the following month. Sierra Leone's government responded by cancelling its mining licence.
As part of the agreement signed on Friday, Sierra Leone will take a non-dilutable 10% stake in a new company that will replace SL Mining and resume operations at Marampa by June 1, Gerald said in a statement.
Gerald will make two $10mn payments this year and will have the immediate right to ship its current stockpile of about 707,000 tonnes of iron ore, it said.
Both sides will withdraw their legal claims before the International Chamber of Commerce (ICC) and International Centre for Settlement of Investment Disputes (ICSID), the statement added.
Gerald’s chairman and CEO Craig Dean commented: "I am delighted that we have been able to resolve our differences and have a fresh start and new beginning with the government of Sierra Leone."
Sierra Leone's Mines Minister Timothy Kabba told a news conference on Tuesday that the agreement was a milestone for the country.
"Whatever the pain we may have borne or dreaded throughout these two years ... this outcome justifies our action," he said.
Gerald estimates that Marampa holds about 1 billion tonnes of iron ore with a potential lifespan of 30 years.
Back in 2019, Dean spoke with Mining about the development of Marampa and commented: "SL Mining offers a substantial opportunity for Gerald Group as our Marampa mine in Sierra Leone is set to deliver six million tonnes of high-grade iron ore during its operational life. If you analyse the iron ore market it has transformed, even from a couple of years ago when prices were very low. Now prices have stabilised we’re in a favourable position with our first shipments leaving for China.
"Our goal is to make ‘Marampa Blue’ an internationally recognised premium grade iron ore brand. We intend to expand the delivery of high-grade 65% iron ore concentrate to markets in Europe and Africa.”