SA's Mining leadership needs to grasp opportunities missed in the last commodity boom
Signs of resurgence in platinum, a stronger gold price and growing coal exports to India should be triggers for South Africa’s mining leadership to grasp the opportunities that it missed in the last commodity boom, according to consulting engineers and scientists SRK Consulting (South Africa).
“It is time for the mining sector to get some traction from the National Development Plan, Mining Operation Phakisa and the Mining Lekgotla – all crucial initiatives that have yet to be given real substance,” said Marcin Wertz, partner and head of the mining unit at SRK Consulting. “Technical, social, labour and policy issues have to be resolved urgently – so strong leadership is now vital if we want to catch the next upturn.”
Wertz said that stemming job losses was a national priority, and mines could only do this if there was better collaboration toward the common goal of economic sustainability.
“SA mines face serious technical and cultural changes if they are to survive,” said SRK partner and principal consultant Andrew van Zyl. “There is a younger generation of professionals who can do this if they are supported by a conducive and more cooperative environment, but changes in attitude are essential. We cannot keep kicking this can down the road and leaving our successors to solve the sector’s problems.”
Van Zyl cautioned that SA’s mature mining industry was not well placed to create more jobs in future; however, better-paid jobs that demanded higher-level skills and technology were on the cards as mines were forced to raise productivity.
The more likely source of future employment growth was in mining’s supply sectors, said Wertz, especially those focused outwardly at the substantial unexplored potential in other parts of Africa. He said there were already early signs of renewed interest in Africa among explorers and developers who see the value in preparing well in advance of an economic recovery.
“SA’s support sectors, from mining machinery and technology to engineering skills and local experience, have much to offer the continent,” he said, “as our local solutions today have to address not just the technical demands of mining, but broader challenges such as local economic development, empowerment and migrant labour. These are common themes throughout Africa.”
Many clients appreciate working with SA companies which have experience around the continent, according to Van Zyl, especially as projects became larger and more complex.
“These more ambitious projects require lengthy stakeholder engagement and familiarity with different regulatory and policy regimes,” he said. “Generally speaking, SA has walked many miles on a mineral journey that some African countries have yet to begin.”
Van Zyl emphasised the developmental potential of successfully exploited bulk minerals in Africa, which demanded local, national and even cross-border regional infrastructure that precious metals like gold and platinum could often do without.
“Large mines extracting commodities like iron ore or bauxite – when planned with consultation, patience and detailed investigation – can leverage public and private funding for considerable national advantage,” he said. “Public sector provision of rail lines and harbours, augmented by mine-related products and services from the private sector, leads to positive knock-on effects that ripple through the whole economy.”
Indeed, he added, the constrained financial climate provided much-needed breathing space for mining companies and governments to consider, plan and discuss ambitious mining opportunities – especially those requiring intricate contractual arrangements among many participants.
“A good pre-feasibility study, for instance, is not a costly exercise but can lead to huge savings –by helping optimise a planned operation, by facilitating meaningful negotiations with stakeholders, understanding options should the macro environment change or by preventing the wastage of much greater sums,” said Van Zyl. “But to rush the planning process opens the door to considerable risk that Africa’s struggling mining sector can ill-afford.”
Barrick profit beats expectations as copper, gold prices up
Barrick Gold has reported a 78% jump in first-quarter profit, beating analyst expectations thanks to rising gold and copper prices, and said it was on track to meet annual forecasts.
Production in the second half is expected to be higher than the first, the gold miner said, thanks in part to the ramp-up of underground mining at the Bulyanhulu mine in Tanzania and higher expected grades at Lumwana in Zambia, reports Reuters
Barrick’s first-quarter gold production fell to 1.10 million from 1.25 million ounces due partly to lower grades at its Pueblo Viejo mine in Dominican Republic.
Adjusted profit surged 78% to $507mn in the quarter ended March 31, from $285mn a year earlier, and Barrick announced a 9 cent per share quarterly dividend.
Stronger prices helped boost Barrick’s revenue from its copper mines in Chile, Saudi Arabia and Zambia by 31% from the fourth quarter. Overall earnings per share were $0.29, ahead of analysts’ estimate of $0.27.
“We expect a positive stock reaction to the earnings beat and strong cash flow,” said Credit Suisse analysts.
Potential for South Africa merger
Barrick CEO Mark Bristow, who has championed mergers across the gold industry, said he backed the idea of South Africa-listed miners Goldfields and AngloGold Ashanti combining.
Speculation has been swirling around the two companies and Sibanye-Stillwater, whose CEO Neal Froneman floated the idea of a three-way merger.
“I’m a South African, and this country has such a great mining history and it would be great to see a real gold business come out of the many failed discussions that we’ve seen,” said Bristow.
Goldfields declined to comment. In a statement, AngloGold Ashanti said it was focused on delivering on its growth plan to unlock value from its portfolio of gold assets.
Bristow also said he had met with the Democratic Republic of Congo’s new mines minister and other officials and was continuing to work on getting $900mn belonging to its Kibali mine joint venture out of the country.
“We have a solution, it just needs to be sanctioned by the appropriate authorities which haven’t been around for a while,” he said, referring to a recent government overhaul by President Felix Tshisekedi.