Vehicle, mining industries face “enormous difficulties”

South African Finance Minister Trevor Manuel said on Friday the mining and automobile sectors would face “enormous difficulties” but this was not unique to local industries.

Manuel was addressing reporters after returning from the G20 summit in London, at which countries agreed to triple funds of the International Monetary Fund to address the worst economic crisis since the 1930s.

South Africa’s mining and automotive industries have been hard-hit by a global economic slowdown putting thousands of jobs on the line.

Asked if he was more optimistic South Africa would avoid job cuts he said:

“I would have to lie to you if I said that we concluded an agreement yesterday that allows for the sales of platinum to rise and that jobs in the platinum mining industries will be reinstated.”

“These sectors are going to face enormous difficulties. I think the automobile sector is also going to face enormous difficulty, but that wouldn’t be a uniquely South African situation.”

Meanwhile, ratings agency Fitch Ratings on Friday issued a statement which confirmed Manuel’s stance.

The agency said the global economic downturn is having an increasingly negative impact on South Africa’s automotive sector.

“As a consequence, Fitch believes that the credit profiles of South African automotive companies are expected to come under increasing pressure over the next 18 months, and that a recovery in market conditions is not expected prior to 2011,” it said.

The agency believes companies with strong cash generation and financial flexibility will be better positioned to weather the current economic downturn. Key rating drivers will include an increased focus on strong liquidity and the ability to de-leverage.

Raymond Hill, senior director and head of Fitch Ratings’ Emerging Markets corporate team, said: “The combination of the negative trends in vehicle sales, export data and GDP forecasts with the expected adverse impact on automotive companies’ credit metrics, most notably leverage and cash flow generation, mean that further corporate downgrades seem probable in the short- to medium-term.” – Reuters

Source: iol

South African industry works towards ensuring water sustainability

The South African government has shown its commitment to ensuring future water sustainability through a number of water protection campaigns and investments.

The governments’ contribution to ensure future water sustainability is a clear demonstration of its commitment to finding solutions to the country’s multifaceted water challenges.

South Africa’s deteriorating water quality is a key factor in the country’s diminishing a water resource which is predicted to result in a 17% gap between supply and demand by 2030, if the problem is not addressed.

Improperly treated sewage, pesticides and fertilisers entering the water systems through agricultural practices and hazardous chemicals being released into the water systems by mining operations all contribute to the pollution of the country’s fresh water systems.

The mining sector has been a mainstay of the South African economy for more than 100 years, contributing 18% to the country’s GDP and employing 500 000 workers.

However, due to the nature of the business, it is also unfortunately a significant contributor to water pollution.

Although mining operations use relatively small volumes of water compared to other industrial sectors, the environmental and aquatic impact from water pollution caused by mining operations is significant.

Mining operations generate excess mine water and acid mine drainage (AMD) caused by toxic metals and other contaminants seeping out into rivers and other waterways.

As  a result, the government has recently committed to contributing R600 million annually to address the AMD problem in the country.

This investment comes after the successful completion of a short-term project to resolve the AMD problem in the Gauteng region by the Trans-Caledon Tunnel Authority (TCTA), a state owned entity under the Department of Water and Sanitation.

The TCTA has recently been nominated by the Department of Water and Sanitation (DWS) to implement a long-term solution to the problem, which will involve further treatment of the mine water by removing the sulphates and creating water to be used in industry and as  potable water, resulting in the conversion of the AMD problem into a long-term sustainable solution by producing safe water.

Mine water strategies for the future

The Strategic Water Partners Network (SWPN) is a collaboration platform for some of the country’s biggest-name public and private, environment-savvy organisations and provides an avenue for high level public private engagement on water stewardship.

Thematic working groups have been set up within this initiative to address key priority areas relating to water quality, one of these being the management of effluent and waste water which addresses both mine impacted water and municipal effluent.

Amongst the group’s objectives are the improvement of mine water treatment to reduce pollutants in the environment, reduction of the amount of clean water required for dilution of pollutants in mining and increasing the availability of fresh water.

Closing the water demand gap

A current key priority is to close the water demand gap within the Olifants River catchment, an area of dense coal mining activity, where the SWPN believes mine water could contribute 11% of the water required to close the gap.

Thereby benefitting municipalities, industry, government and the public and fulfilling the requirement by government for mines to take responsibility for their water management.

Nikisi Lesufi, senior executive at the Chamber of Mines and member of the SWPN commented that in 2012, the Chamber of Mines in partnership with the DWS initiated a project on water conservation and demand management in the mining sector.

The project started by developing a guideline to mainstream water conservation and demand management (WCWDM) in the mining sector.

Thereafter, a process was initiated to set WCWDM targets for the mining sector, to develop accurate water balances, and finally to develop an online reporting system.

“We believe that with this system is in place, and from a sustainability perspective, the mining sector will be able to account for every drop of water from a quality and quantity perspective,” Lesufi says.

Marius Keet, chief director of mine water management at the DWS says that due to limited environmental policies in the early days of mining, water resource management in the mining industry was a fairly low priority.

However, with the introduction of regulations and stringent policies by the DWS together with the Department of Mineral Resources (DMR), significant changes have transpired within the mining industry that resulted in an increased focus on management of mining water uses and protection of water resources.

Water management strategies

Collective ‘water accounting’ for all mines working in a common catchment should be in place ensuring that the management of mine water does not present socio-economic and environmental risks.

“Moreover, such risks require appropriate management interventions, especially when mine closure is sought, thus ensuring any mining-related pollution is not externalised,” he commented.

Following the collaborative SWPN model, several mines operating in the Olifants Catchment have already begun jointly implementing strategies to manage excess mine water, such as the collaboration between Anglo American and South32, which has seen the construction of a desalination plant to ensure that excess mine water discharged into streams is acid-neutral.

Using membrane technology in a reverse osmosis process, this desalination plant accepts effluent from five mines and is modified to achieve 99% efficiency in salt removal, thereby treating it to potable water standards and supplying it to local municipalities. This is one of several examples of collective action to improve water quality.

The SWPN highlights and commends the efforts made to improve mine water management at Kilbrachan colliery –  a non-operational coal mine in Newcastle owned by power utility Eskom, located next to Ingagane River.

Eskom together with tertiary education institution the University of the Free State have undertaken to implement a pilot plant at the Kilbrachan site to determine if the plant can be used to manage water levels at the underground mine.

The pilot plant is based on a BDAS (barium carbonate-disperse alkaline substrate) technology which uses wood chips coated with barium to treat mine affected water.

The pilot plant is comprised of four tanks filled with barium coated wood chips.

Polluted water is pumped into the tanks and allowed to react with the coated chips which successfully treat the polluted water.

By using this passive system, the water is being treated to almost potable standards, which provides great opportunities for use of this water by other sectors, including municipalities and irrigators.

A further example of innovation by SWPN members is that demonstrated by petrochemicals producer Sasol in its Synfuels operation in Secunda, where excess water from underground mining operations is pumped into a holding dam.

Then desalinated through a membrane plant or electro dialysis reversal (EDR) and further desalinated using a spiral reverse osmosis membrane (SRO).

Innovation needed to solve AMD

The SWPN believes  that solving the AMD issue will require a mix of innovative solutions which include both active and passive treatment.

Passive management options include the use of saline mine water for food production that aims to make beneficial use of a challenging resource which nevertheless carries extensive potential.

The SWPN in partnership with the Water Research Commission (WRC), Anglo Coal, Exxaro and South32 are currently undertaking a demonstration project on 60 ha of allocated land on the Mafube Colliery, which uses poor quality mine water for soybean and wheat production.

These are highly salt tolerant crops for which South Africa is currently a net importer.

This demonstrates the significant potential for the mining and agricultural sectors to work together to achieve food security whilst also contributing to the protection of water sources.

Active treatment, which encompasses systems engineered to accommodate any acidity, are more costly than their passive counterparts.

Passive systems are generally less costly but have limitations in that they are best suited to treatment of water with lower acidity loads.

Whether by either active or passive treatment, the SWPN believes that treating AMD has the potential to provide significant benefit in the reuse of the water by the mines themselves and other key sectors.

With every challenge faced, there are emergent opportunities to be seized and the mine water and AMD domain is a prime example.

It is time that the water sectors moves beyond the admiration of the problem and rather focus on its efforts on the vast possibilities, options for tangible positive results and sustain the South African economy.
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Public-Private Sector Ventures Key to Devt of Africa’s Mining Sector, Says AU Expert

The global mining industry is struggling right now amid drop in global metal prices. What is the commission doing to support sector players on the continent?

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African Union has designed a new strategy that is expected to bolster the mining sector. The Africa Mining Vision and other initiatives are currently being domesticated by member states because they realise that supportive legal regimes, regulatory frameworks and policies are essential to build strong private sector and ensure growth across sectors, including the mining industry. Besides, public-private partnerships are some of the strategies that will help drive socio-economic transformation on the continent.

As Africa enters a new paradigm in her development, with industrialisation and structural transformation at the centre, public-private sector partnerships will play a critical role to create more jobs for the growing population and spur growth.

With the public and private sectors working together, everyone is a winner. So, the AU promotes such initiatives in the mining sector, too, to ensure it is not hard-hit by the turmoil in the global arena.

Besides, the Africa Mining Vision seeks to strengthen the licensing regime to ensure investors operate in a friendly environment.

The pact is primarily targeting mining, and oil and gas companies, as well as chambers of mines and mining associations.

The treaty comes at a time when the extractive industry is under extreme pressure from depressed commodity prices because of the continuing slowdown in the world economy, and especially in China, a key metal buyer.

The new strategy will, therefore, provide a platform of cooperation where by private sector leaders, chambers of mines, and regional mining associations can benefit from multi-stakeholder engagements in domesticating the Africa mining vision to regional and national mining visions to drive the sector’s development.

Can you specify how this strategy will benefit the mining industry?

The private sector stands to gain from reduced operational costs, and interventions that will boost productivity. For example, the mining vision seeks to build a skilled and motivated workforce which is instrumental in enhancing the sector’s productivity, competitiveness and sustainability, challenging market conditions notwithstanding.

Expenses associated with delays that result from community relations or labour issues, as well as timely and cost-effective provision of goods and services, can be realised through the vision’s compliant mineral policy and regulatory frameworks at country level.

What are some of the highlights of the pact?What should Africa do to ensure sustainable utilisation of its natural resources, such as minerals?

Under the treaty, companies commit to pay all mineral rents and royalties, and make their payments public to promote accountability. Governments are also expected to publish all legal agreements with companies and actively ensure that all commitments from government agencies, including tax refunds and granting of permits, are honoured in a timely and transparent manner. Companies subscribe to the principles of national, regional and international resource monitoring and oversight bodies and commit to fight corruption and transfer pricing.

States should adopt zero tolerance to bribery and corruption and prosecute those that promote such practices in the sector.

Sector players are also pledging to support national geological surveys with geological data, while states commit to funding of the geological surveys and relevant ministries to avail knowledge infrastructure incorporating this data to the public to allow firms make informed investment decisions.

Companies will also invest in human capacity development and support national and regional institutional capacities beyond payment of mineral taxes and royalties. Countries should support science, technology, and engineering, and mathematics (STEM) education to world standards to meet the demands for trained staff within government bodies and the sector.

What should Africa do to ensure sustainable utilisation of its natural resources, such as minerals?

Africa cannot afford to get it wrong this time round, there is no room for error… she must have it right. This can only be achieved through broadening partnerships and bringing on board the private sector to participate in policy formulation and implementation.

Without proper engagement with the African private sector and all the stakeholders, a vacuum can be creates, resulting in making of wrong choices. The scars inflicted by some of the extreme policies, such as post-colonial government protectionist import substitution industrialisation and market driven liberalisation structural adjustment policies have had lasting negative impact in many areas of the economy of the continent. so, Africa cannot afford to make more mistakes. It is important that these policies are drafted by Africans to ensure ownership and successful implementation .

So we need to learn from our past failures, and develop, and apply our own researched and tested prescriptions.

That’s why in the African Union Commission’s “call to action” Agenda 2963, the role of the private sector is paramount because it is the engine of growth.

Traditionally, partnership building has been skewed towards development partners because they fund our national budgets. However, Africa has been losing over $50 billion a year, more than official development aid flows to Africa, through illicit financial flows.

To end this resource hemorrhage, Africa requires high level private sector engagement and commitment because both governments and the private sector work for the common good.

The mining sector is not playing its transformative role yet and the “mineral curse” paradox still haunts the continent.

Besides, there are issues of transparency and accountability on the continent which affects the sector.

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South Africa: Opportunities for Youth in Mining

Pretoria — South Africa’s mining industry has plenty of opportunities that young people from diverse backgrounds and educational qualifications can access.

The Deputy Director General of Mineral Regulation, Joel Raphela, at the Department of Mineral Resources on Tuesday said government supports youth upliftment programmes aimed at improving young people’s participation in mining.

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“We continue to reach the youth through the departmental Learner Week Programmes, where we create mining awareness by organising mine visits around the country.

“We also provide learnerships and internships to learners and graduates as part of bridging the work experience gap needed in the employment market,” said Raphela at the Youth in Mining Summit held in Johannesburg.

The summit comes as South Africa commemorates the 40th anniversary of June 16. The entire month is used to focus on matters of youth development.

Delegates at the summit on Tuesday included youth formations, captains of industry and young entrepreneurs. Raphela said there are numerous opportunities young people can tap into through the department’s state entity Mintek, a research and development organisation specialising in all aspects of mineral processing, extractive metallurgy and related technology.

Mintek has been helping young people, who may not have higher education qualifications, find sustainable mechanisms of generating income while also creating jobs for others in jewellery making, glass bead manufacturing and pottery.

“Urban mining presents numerous opportunities for young people to use urban waste to manufacture saleable products, without necessarily having a higher education qualification. The glass bead manufacturing process is a great example of this.

“Mintek provides training in the crushing of glass bottle waste using particular techniques and turning the crushed glass into beads that are then used to make products such as household decoration items and costume jewellery,” said Raphela.

Mintek has further assisted the provincial government of the Northern Cape by setting up two training and beneficiation centres in Upington and Prieska, which provide practical training for making jewellery from semi-precious stones – especially the tiger’s eye that is mined in the province.

Participants are also assisted to develop skills for grading semi-precious gemstones using simple techniques that are easily acquired, so that they can manufacture products that are of good quality for the market.

Last year, Mintek provided practical training to 148 students, in partnership with the Mining Qualifications Authority (MQA) and the Department of Science and Technology. Thirty-six of these students have been placed in numerous foundries across the country, where they gain practical skills for melting metals and casting them into aluminium or cast iron products.

The Department has also recently appointed 38 learner inspectors after they successfully completed a two-year training programme. Forty-two percent of the inspectors are women.

This programme was initiated by the department, in collaboration with the Mining Qualifications Authority (MQA), Sibanye Gold and AngloGold Ashanti.

Unemployed graduates were recruited from previously disadvantaged groups and given practical experience in the field of occupational hygiene, surveying, mining, electrical and mechanical engineering.

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Minister wants mine disputes resolved

Mineral Resources Minister Mosebenzi Zwane has urged stakeholders in the mining industry to work together to resolve labour disputes as speedily as possible.

“Mineral Resources Minister Mosebenzi Zwane has appealed to stakeholders in the mining industry to work together in the current wage negotiations to resolve labour disputes as speedily as possible in the best interests of all involved, and South Africa,” said the Department of Mineral Resources.

This as workers downed tools at the country’s coal producers, demanding a R1000 increase for lower level category workers.

The Minister urged all parties to find solutions that will realise the commitments and principles as stipulated in the Framework Agreement for a Sustainable Mining Industry entered into by organised labour, organised business and government to ensure peace and stability in the sector.

“Government urges all parties to continue to use their best endeavours to resolve the impasse,” the Minister said on Monday.

Source: mining-technology

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Electricity shortage, low copper prices hit Zambian mines

LUSAKA – An electricity shortage and weaker copper prices have put pressure on Zambia’s mining industry, threatening output, jobs and economic growth in Africa’s No. 2 producer of the metal. The power problems and copper price slide have driven the kwacha currency to record lows amid a selloff in commodity-linked currencies as key consumer China’s economy has slowed, renewing pressure on Zambia to diversify its economy. Print Send to Friend 0 0 Glencore, Vedanta Resources Plc and China’s NFC Africa and CNMC Luanshya Copper Mine have said they will shut down some operations due to the harsh business environment.

“This is serious, it could bring our economy to its knees,” independent analyst Maambo Hamaundu said. Zambia’s power generation capacity stands at 2 200 MW, with most of the electricity produced from hydropower, but supply is often erratic. State power utility Zesco Ltd, which generates the bulk of the electricity, said last week it would deepen power cuts after water levels at its largest hydropower station dropped following a drought.

President Edgar Lungu said on Friday that Zambia should reduce its overall imports of goods to tackle the country’s trade imbalance, but it should import more power to address the shortages. The Zambian government on Tuesday started importing 148 MW of power from a ship docked off the coast of Mozambique. “CEC (Copperbelt Energy Corporation) has communicated to the mines, the need for them to begin accessing imported power,” Chama Nsabika-Kalima, spokesperson for CEC, the largest supplier of power to Zambia’s copper mines, said.

Zambia is the world’s No. 8 copper producer. The closure of mines and smelters is likely to hit its output, which was projected to increase to 916,767 tonnes by 2018 from 741,916 tonnes in 2015, largely on account of increased output at the Kansanshi mine owned by Canada’s First Quantum Minerals, according to government data. The slide in global copper prices, to six-year lows last month, has already prompted the government to slash its economic growth forecast for this year to 5%, from an initial 7%, and the deepening power crisis and curbs to copper production risk a further slowdown, analysts say.

Copper production accounts for 11% of Zambia’s gross domestic product. Labour unions are worried about the impending job cuts, while the government has asked mining companies to consult with the ministry of labour before shutting down operations. “We started importing electricity and they have the option to buy that power and continue with the operations,” the chief government spokesman, Chishimba Kambwili, said. The Zambia Chamber of Mines, an industry body, said it was talking to the government over the problems facing the industry. “We understand the severity of the situation. We want to work with the government to find a long-term solution to this problem,” the chamber’s chief executive, Maureen Dlamini, told Reuters.

Source: engineeringnews

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Major South African gold producers fly into the danger zone

Many of South Africa’s major gold mines will be making losses.

LONDON -A few months ago, Mineweb published a thought-provoking article suggesting the South African Gold Mining industry as we know it might not survive beyond the end of the decade (See: Could SA’s gold mining industry be gone by 2020?).

In it Patrick Cairns reported on a talk by Peter Major, mining specialist at Cadiz Corporate Solutions, to JSE’s Power Hour in Cape Town, where he laid bare the serious problems facing the industry which have almost brought it to its knees. The current gold price is now around, or below, many of the miners’ latest AISC guidance levels and if the forecasts of most mainstream analysts are to be believed – the future of the industry looks bleak.

Major’s talk pointed to numerous political and union-related changes that have already seen the industry reduce to a fraction of the size it was only a decade or so ago. And unless there is a major pick-up in the gold price there would seem to be little prospect of any recovery. A combination of further falling prices and the implementation of a higher wage agreement will undoubtedly result in more closures and/or fewer jobs.

As Major pointed out, issues like government interference, the power of and conflict between unions, and BEE legislation, have all contributed to a situation where domestic gold mine productivity has dipped dramatically, and all this in the face of a declining gold price over the past four years.

While the fall in the value of the South African Rand against the US dollar has helped mitigate potential earnings losses (gold sales are in dollars while most local costs, particularly labour, are in Rands), the miners are, without exception, on the brink with respect to their South African production.

With most South African mines operating at such extreme depths, while grades have also been on a declining path, and with the breakdown in wage negotiations between the unions and the major mining companies suggesting a possible strike, the domestic industry is at a tipping point.

Indeed, one suspects the longer term future of the mining companies may lie in overseas operations where AngloGold, in particular, seems to be coming up with some positive results.

Let us look at the mining companies individually:

Major South African Gold Stocks






*Harmony has a June year end, so latest figures are for its Q4 and for its year to end-June 2015 gold output.

Global rankings from Metals Focus.  Data from company statements.
In terms of combined gold production from domestic and overseas operations, AngloGold is the world’s third largest gold miner in terms of global gold output. Like its North American counterparts, AngloGold is going through a process of cutting costs and debt and with the recently announced sale of its Cripple Creek and Victor mines in Colorado, USA, to Newmont Mining for $820 million is making some significant inroads. But the company’s debt remains high with gross borrowings of $3.6 billion at the end of June.

In the company’s 2nd quarter results executives tried to put a positive spin on things, noting that it managed to generate some $71m of free cash flow in the quarter. Production and costs beat guidance on the back of another strong performance from its international mines and a recovery from its South African operations.

From the South African gold mine perspective, All-In Sustaining Costs (AISC) was still a worrying $1,098/oz from its SA mines – actually above some recent global gold price levels and with a significant wage increase commitment likely on the horizon.

The profitability prospects for its domestic mines are not exactly favourable bar a sharp gold price increase or a further substantial fall in the Rand/Dollar exchange rate. The saving grace on costs are its international operations where AISC were an impressive $844/oz – down 17% on a year earlier, with the new 45% owned Kibali mine in the DRC (operated by Randgold Resources) the best performer with AISC of only $601/oz. Read: AngloGold Ashanti climbing its mountain of debt.

Perhaps ominously, the company warned at the end of its financial results that production and cost estimates ‘assume neither labour related interruptions, power or other disruptions at our operating mines. Other unknown or unpredictable factors could also have material adverse effects on our future results.’

Gold Fields

Gold Fields is the world’s 7th largest gold miner by annual production, but its operations now largely fall into the international category with the technically challenging South Deep, its only remaining South African mine. The rest of the South African assets were floated into what is now Sibanye Gold a couple of years ago. Even so its AISC in terms of both 2nd quarter figures and in guidance, are again far too close to the current gold price for comfort.

It is the only one of the South African gold majors not to have reported its latest financial figures so far – these will come out on the 20th, but it has reported its operating costs figures and guidance for the year already.

Sibanye Gold

For the moment Sibanye Gold is totally reliant on its aging mines in South Africa for its annual production, which still puts it in the world’s No. 10 spot, and makes it South Africa’s largest domestic gold miner. Among its mines are some of the world’s biggest gold producers ever – notably Driefontein and Kloof – but these are now, like most South African mines, getting ever deeper with the main pay shoots mined out years ago. With ever greater technological and operational challenges, mostly because of depth of working and declining grades, even these top mines are running at AISC levels of $969 and $1068/oz respectively in the 2nd quarter.
The company’s overall 2nd quarter AISC were $1054/oz – again too close to current gold prices for comfort – as is guidance for the full year at $1050-$1100 an ounce. This is all despite Sibanye CEO, Neil Froneman, expecting a better second half of the year and is an indicator of the fierce cost pressures facing even the most productive of South African mining operations.
Interestingly the company, which has remained profitable overall, is looking at diversification with an eye on taking on platinum mines which may be sold by Anglo Platinum, and Froneman has also not ruled out looking outside South Africa for future gold mining projects.

Harmony Gold

Harmony is perhaps the most troubling of South Africa’s gold miners having been built up largely on the acquisition of what were even then mostly marginal gold mines. Its expertise over the years has been to take these and by dint of the implementation of efficient mining strategies, ride the gold price upwards and thus record some decent profits.
But conversely, at the recent lower gold prices it has been struggling. It has been exploring and developing some very promising international mining projects (partly in conjunction with Australia’s Newcrest). These have included exploring in the sometimes difficult political and social environment of Papua New Guinea, and it is with these that the company’s long-term future depends on, although financing such large projects there may be a challenge. These PNG projects now account for nearly half the company’s attributable gold and gold equivalent ore reserves.

Harmony’s latest operating results (it has a June year end so these are for its 4th quarter and 2015 financial year) must be worrying for management with overall AISC of $1,233/oz putting most of its operations heavily into loss-making territory.

The one positive is that it managed to make a headline profit for the latest quarter, although ultimately recording a significant book loss due to heavy impairment charges. While soon-to-retire CEO, Graham Briggs, says that the target is to bring all its mines on to a profitable basis in the new financial year, this is easier said than done. Perhaps of all the major South African miners it is the most vulnerable to forced closures of some of its domestic operations.

So overall, bar a significant gold price increase, South Africa’s once globally-dominant gold mining industry has to be seen as in its twilight years as the major miners cannot go on sustaining loss-making operations indefinitely.

While there are still some profitable South African gold mines at the current gold price, we will undoubtedly see some more closures moving forwards while the operating companies continue to battle to further reduce, or at least contain, operating costs. While the industry may not die completely by 2020, it certainly looks likely to continue to contract.

Source: moneyweb

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Mining sector’s bloodbath deepens

Johannesburg – The jobs carnage in the mining industry is likely to continue as high-cost mines close over the next three years.

Declining commodity prices, subdued economic growth in China and weak demand have seen mining houses dramatically cut costs in the past few months, but this is not enough to save the struggling industry.

Yesterday, credit rating agency Moody’s Investors Service said AngloGold Ashanti and Gold Fields would have to restructure their operations to a lower gold price after the precious metal fell to $1 091 (R13 755) an ounce on Friday, more than $230 below its 52-week high.

The slump was driven by prospects of rising interest rates, a strong dollar and heavy selling in China and India.

The Moody’s research concluded that the gold price decline was credit negative for both companies because it would lower their revenues.


Peter Major, an analyst at Cadiz Corporate Solutions, said many more jobs were on the line due to declining productivity.

“There has to be more job losses on the cards because companies are operating at massive losses. High-cost gold mines will close in three years. Unfortunately, most of gold mines have become high cost,” Major said.

The ANC yesterday called on companies to revise their job shedding plans as they would worsen the local economy. However, market dynamics, including rapidly declining commodity prices were beyond their control.

Major said South Africa’s mining sector had become inflexible.

“There is too much union and government interference in the operations of our mines. They are all competing. The moment there is us and them there is no hope for mines in South Africa,” said Major.

Johan Botes, Cliffe Dekker Hofmeyr’s employment law director, said the parties should have frank discussions about the state of the industry.

“If ever there was a need for a true partnership between trade unions and business this may be it,” Botes said.

The DA called for drastic action, including the withdrawal of the Mineral and Petroleum Resources Development Act pending a rewrite that would recognise the need for the mines to be financially sustainable.

This comes after diversified global mining company Anglo American said it would shed 6 000 jobs by the end of the year as part of a plan to reduce 54 000 jobs by 2018 as it divests in 15 assets.

The world’s third largest platinum producer Lonmin also said it would cut 6 000 jobs due to lower prices.

Gold reserves

Moody’s analyst Douglas Rowlings said Gold Fields, which operates South Deep outside of Johannesburg, would suffer more because the company calculated the value of its underground gold reserves at $1 300 an ounce.

The company’s 15 percent free cash flow margin target at this level deduces a cash flow breakeven at its mines of $1 105 an ounce.

“Gold Fields could be required to revise its reserve gold price downward under accounting principles if it determines its current assumption is no longer reasonable,” he said.

“This would lead to an impairment of mine values as a result of lower calculated future cash flows. A low gold price would also compound the negative free cash flow situation at the company’s South Deep mine, which will need additional capital expenditures to complete production ramp-up.

Rowlings said AngloGold Ashanti’s free cash flow would also weaken as a result of lower gold prices, despite the company being on a stronger footing after selling its US mine.

“Even though the company no longer has to meet sizable project capital expenditure commitments for its US mine, lower gold prices will make returning to positive free cash flow generation more challenging. A low gold price will also limit the options that AngloGold Ashanti has in deciding what to do with its Obuasi mine,” he said.

Source: iol

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South Africa spends billions on mining towns

South Africa has allocated R18-billion for distressed mining communities across the country. Headed by the inter-ministerial committee (IMC) in charge of revitalising mining communities, projects being undertaken include housing and wellness.
“Overall R18-billion has been dedicated to ongoing work in distressed mining communities, benefitting the following provinces: Eastern Cape, Free State, Gauteng, KwaZulu-Natal, Limpopo, Mpumalanga and North West,” President Jacob Zuma said on 30 June.
“The bulk of this funding is from [the] government, with mining companies contributing approximately a third of the funding.”
Zuma appointed the IMC shortly after the Marikana tragedy, in which over 44 people lost their lives during labour unrest at the Lonmin mine in North West in 2012. Its mandate is to oversee the implementation of integrated and sustainable human settlements, improve living and working conditions of mine workers and determine the development path of mining towns and the historic labour-sending areas.

“The fundamental mandate of the IMC is to change the face of mining in South Africa working with business, labour and other sectors.”
South Africa had undertaken a socio-economic diagnostic study of the 15 prioritised mining towns and 12 prioritised labour-sending areas to get a better understanding of the extent of the challenges in each town and to determine the most appropriate actions to address these.

“In changing the face of mining, we are also drawing lessons from other countries,” Zuma said. He spoke about the Australia-Africa Partnership Facility, saying the country was benchmarking the policy and regulatory system governing the mining sectors in Australia, Chile, South Africa, and Zambia.

Regarding housing, the Department of Human Settlements was implementing about 66 public sector housing projects in the 15 prioritised mining towns. In the 2014/15, financial year more than R419-million was spent from the ring-fenced budget for upgrading informal settlements in prioritised mining towns in Limpopo, Free State, Gauteng, Mpumalanga and North West.
“Overall over 7 000 units have been delivered in the mining towns.” For this financial year about R1-billion had been ring-fenced, which would deliver about 19 000 new houses.

Two of the housing projects were in Marikana, where about 500 houses would be built on land donated by Lonmin.
In addition to the ring-fenced human settlement grant funding, the department’s housing agencies have contributed over R1-billion to integrated human settlements in mining towns. This includes 17 341 loans of R239-million for incremental housing from the Rural Housing Loan Fund; R673-million delivering 3 405 mortgage and social housing units from the National Housing Finance Corporation; bridging loans of R95.6-million for 1 177 affordable houses and R36-million for 4 546 subsidy units from Nurcha’s Construction Finance and Programme Management.

Zuma said the government embraced partnerships.
“We understand that when working together, we can achieve much more that leads to a greater impact than when working in isolation,” he said, adding that stakeholders in business, labour and the government had actively supported and participated in formulating the government’s strategic approach for accommodating mineworkers in decent housing and living conditions in mining towns.

Creating jobs
Turning to socio-economic conditions, Zuma said that, led by the Department of Trade and Industry, the departments of Co-operative Governance, Traditional Affairs, Rural Development and Land Reform and Small Business Development were facilitating large and small scale industrial projects in the 15 mining towns.

These were critical in creating business and employment opportunities. In addition, Trade and Industry is helping selected municipalities and regions to develop and implement regional industrial development plans.
These include interventions in Bojanala and the Greater Tubatse local municipalities for the establishment of a platinum group metals special economic zone (SEZ).

Feasibility studies, business plans and the appointment of a project management unit have been completed and the SEZ designation and land acquisition is being finalised.

Others include the establishment of an agri-hub in Bojanala, Madibeng and Marikana for agriculture production and a processing facility, as well as the Vulindlela Industrial Park Revitalisation in King Sabata Dalindyebo Municipality, in Eastern Cape.
These projects, which include a multi-sectoral business park, will promote sustainable manufacturing investments into the region.

Health care
On the wellbeing of the miners, the Department of Health, together with the departments of Labour and Mineral Resources, is working towards the alignment of the industry’s occupational health and safety policy.
The goal is to build an enhanced social protection system, as well as reorganise the compensation system and access to benefits for former and current mineworkers.
“The Department of Mineral Resources is employing mine accident and occupational diseases prevention mechanisms through improved mine inspections, audits, investigations and monitoring of occupational exposure levels,” Zuma said.
Enforcement and inspections have been beefed up through 40 regional medical inspectors, analysis of annual medical reports from the mines’ provision of standards on workplace exposures, implementing inspection and audit tools for occupational health services, promotion of occupational health in the mining industry, and reviewing research relevant to occupational medicine in the mining industry.

Furthermore, the departments of Mineral Resources and of Health are employing strategic interventions to promote healthy and safe working conditions. These include ensuring the reduction in falls of ground accidents by 20% annually; actively promoting awareness of the National Strategic Plan on HIV, STIs and TB; preventing personal over-exposure to silica dust; and promoting active linkage of dust exposure to medical surveillance.

The Department of Health has established one-stop service centres to bring health and compensation services to former and current mine workers in the mining towns and in labour-sending areas.
There are centres in Mthatha in Eastern Cape as well as Carletonville in Gauteng. More one-stop service centres will be established in other provinces, beginning in Kuruman in Northern Cape and Burgersfort in Limpopo.
The state will also set up mobile units in neighbouring countries such as Lesotho and Swaziland during the 2015/16 fiscal year.

Operation Phakisa
Zuma said he was making good on his promise in his State of the Nation Address to launch a mining version of Operation Phakisa, the integrated delivery system in the health and oceans economy sectors.
It would be discussed when the National Consultative Forum on the Mining Sector met later this year.
“To date, the Presidency has engaged in more than 15 consultative meetings with the [chief executives] of mining companies, representatives of civil society and national office bearers of labour unions and there is overwhelming support for the Phakisa process.”

His government was determined, working together with other stakeholders, to steer the mining industry towards increased investment, growth and transformation while being mindful of the social, environmental and health impacts on people in mining towns and labour-sending areas.

“The migrant labour system has been the backbone of the mining industry in South Africa and continues to have an enduring impact on both mining towns and rural labour-sending areas,” he said, urging all stakeholders and communities to work with the government to try to revitalise the mining sector.


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South Africa mines minister hails ” safest year ” in industry

JOHANNESBURG (Reuters) – South Africa’s mines minister on Tuesday hailed 2014 as the “safest year” in the history of an industry that has claimed a huge toll in mostly black lives over the past century.

“There has been a reduction of about 86 percent in fatalities from 615 in 1993 to 84 in 2014, which is the safest year on record for the South African mining industry,” Ngoako Ramatlhodi said in prepared remarks.

Last year was exceptional for South African mining, with a five-month strike that brought most of the industry’s platinum production to a halt – a factor that probably contributed to the record as it meant tens of thousands of miners were not underground and exposed to danger during that time.

But Ramatlhodi said “the figures till the end of March 2015 show that we are well on track to improving further” on the 2014 numbers.

South Africa’s mines are the deepest and among the most dangerous in the world, reaching depths of 4 km (2-1/2 miles) below the surface. Under apartheid, scant attention was paid to the safety or well-being of an overwhelmingly black workforce.

Since the end of white minority rule in 1994, the government has been pushing a safety drive with the goal of “zero harm” in the shafts.

In recent years, the industry has at times complained that the drive was overzealous, with unnecessary safety stoppages imposed by inspectors, resulting in output and revenue losses.

Ramatlhodi, who was addressing one of the houses of parliament before a vote on his department’s budget, also said his ministry had started issuing notices to “licence holders” who have not complied with a government-mandated “mining charter”.

He did not specify what he meant by “notices”, but companies that fail to comply with the charter can face a number of sanctions including the loss of their mining licences.

Ramatlhodi has said 79 percent of mining companies have complied with a government target of achieving at least 26 percent black ownership of operations, a key component of the charter, which is aimed at redressing racial imbalances.

The industry disputes this, while the government and the Chamber of Mines have taken the issue to the courts.

Source: af.reuters

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