South Africa is currently attracting just 1% of global spending on mining exploration, a figure that normally reaches R160-billion annually.
Several industry leaders have expressed concern about the low level of exploration activity, but in 2020 they were joined by the Economic Transformation Committee (ETC) of the African National Congress (ANC), the country’s majority political party. The ETC sees exploration as a way of broadening the scope of ownership within the mining industry.
Gwede Mantashe, South Africa’s Minister of Mineral Resources and Energy, wants to see South Africa attracting at least 5% of global exploration. For exploration to expand a reliable cadastre is required. A cadastre is a record of property boundaries and ownership. The Council for Geoscience is working on this. Drone technology could take the mapping process forward, allowing for more exploration at a lower cost.
In his 2019/20 budget vote, Mantashe noted that about 4 000 permanent jobs would be created by the recent investment of about R45-billion through projects such as Exxaro’s Belfast expansion (coal), Sasol’s coal mine replacement programme and Vedanta Resources’ huge zinc mine in the Northern Cape.
An overview of the mining sector in South Africa
Many mining companies want to start generating their own power, particularly in the light of unreliable supply from the national utility, Eskom.
African Rainbow Minerals is currently operating just three of its 10 plants in the ferroalloy sector, with the cost of electricity the main reason for reduced activity. ARM is constructing a demonstration ferromanganese plant to test alternative energy systems with the hope that costs can be significantly reduced.
The CEO of Minerals Council SA, Roger Baxter, calls the hurdles faced by mining companies trying to put alternative power projects in place, a “serious challenge”. In 2019 Minister Mantashe wrote to the National Energy Regulator of South Africa (NERSA) granting a deviation from the existing Integrated Resources Plan (IRP) to allow for the quick licensing of generation facilities up to 10 MW.
Coal giant Exxaro has disposed of its stake in Tronox Holdings (mining and processing of titanium ore, zircon and other minerals) but in 2019 took full ownership of renewable energy company Cennergi, which owns two wind farms in the Eastern Cape. Indian company Tata Power held 50% of the company through a wholly-owned subsidiary before the sale.
Despite the global lockdown, Exxaro expected earnings for the first six months of 2020 to be higher than the R3.2-billion earned in 2019. The weaker rand and record coal exports helped to balance lower dollar prices achieved.
Coal continues to be an important part of the South African mining landscape, despite pressure to move to renewable resources. As Baxter points out, “In 2018 the sector employed almost 90 000 people (representing about 19% of total employment in the mining sector), with an estimated 180 000 further people employed as a result of coal mining activities.”
Gold Fields’ earnings for the half-year to June 2020 increased four-fold because of a buoyant gold price. The August 2020 price for gold reached nearly $2 000. Analysts warned against reading too much into some of the more extreme rises in the value of gold mining stocks (DRD Gold went up some 240% between January and July) because the underlying conditions for gold mining in South Africa are tough.
Implats (Impala Platinum) was expecting to report annual headline earnings five times better as a result of improved commodity prices.
Good mineral prices kept mining shares buoyant during the lockdown.
Another company to report improved half-year results was Sibanye-Stillwater which increased volumes at its platinum group metals (PGM) operations and its gold mines in the first half of 2020. Some production was lost due to the steps taken to deal with Covid-19 but, because of the inclusion of the Marikana operations (bought from Lonmin), South African PGM production actually increased by 5% year-on-year to 657 828 ounces.
Gold production within the group was also up after strikes affected volumes in 2019. Production of 403 621 ounces was 17% higher than the previous year’s figure. The group expects all of its South African operations to be running at optimal production levels by the end of 2020.
The sale in 2020 by AngloGold Ashanti of its Mponeng mine and Mine Waste Solutions to Harmony Gold for $300-million (about R4.4-billion) marks the end of an era. Although the company’s headquarters will continue to be in Johannesburg and it will be listed on the JSE, its mines are in Ghana, the Americas and Australia. AngloGold Ashanti was the successor to the mining company formed by Ernest Oppenheimer in 1917.
Harmony Gold’s acquisition strategy, including the purchase from AngloGold of Moab Khotsong mine in 2017, will result in it being the country’s biggest gold producer. With 350 000 new ounces coming from Mponeng, it could produce an annual total of 1.7-million ounces.
Afrimat continued to expand its commodities portfolio in 2020. Previously focussed on construction materials, Afrimat bought a 27.27% stake in a high-grade anthracite mine in Mpumalanga, Nkomati, and followed this with the purchase of Coza Mining, an iron ore and manganese company in the Northern Cape. Afrimat’s first foray into commodities was also in that province, the R322-million acquisition of the Diro mine. In October 2020 Afrimat applied for Nkomati to be placed under business rescue because of the Covid-19 lockdown but stated that it believed the business could indeed be resuscitated.
An ongoing project by De Beers to convert its Musina mine from an open-pit mine to a vertical-shaft mine will extend the life of mine of this northern Limpopo project to 2045. Venetia Mine is by far the most important part of De Beers’ South African operation, accounting for 3.1-million of the 5.4-million carats recovered by the company from its six operations.
Petra Diamonds has made it known that it will consider offers for parts of its business or all of its operations. This follows a strategic review where the issue of a R11.25-billion debt repayable in 2022 loomed large. The review began when the South African Covid-19 lockdown began. Most of the company’s major expenditure on expansion projects is behind it but reduced demand, even before the lockdown, has affected earnings. Revenue for the six months to December 2019 was down by 6%. Of the company’s three South African mines, Finsch (Northern Cape) and Cullinan (Gauteng) generate 90% of output and 75% of revenue.
In the Northern Cape, Ekapa Mining paid R300-million to buy out Petra Diamonds from a JV.
When phase three is reached, the biggest new mining project in South Africa will deliver 600 000 tons of zinc for Vedanta Zinc International. Located at Aggeneys in the Northern Cape near the border with Namibia, the Gamsberg zinc project has so far attracted $400-million in investment from the company and has started trucking product to the Port of Saldanha. Phase one of the open-pit operation will deliver an annual load of 250 000 tons of zinc. If it proceeds to phase three, it will likely go underground.
The Northern Cape Province is planning for a deep water port development at Boegoebaai. Part of the strategy involves the creation of a commodities corridor linking the Upington Industrial Park with the port.
In August 2020 Australian miner Orion announced it had raised $6.2-million in share capital towards its Prieska Zinc-Copper Project.
Iron ore and manganese
In 2019, Sitatunga Resources purchased the East Manganese project on the Hotazel-Kalahari ore belt from Southern Ambition. Menar Holdings, which controls a majority share in Sitatunga, is mostly invested in coal.
The overwhelming majority of the world’s manganese comes from the Postmasburg and Kalahari regions of the Northern Cape. Assmang has two manganese mines in the province: Nchwaning and Gloria.
The Northern Cape produces more than 84% of South Africa’s iron ore. The province has two major iron belts, from Postmasburg to Hotazel, and running through Sishen and Kathu. Sishen is the most important iron-ore mine in South Africa, where operations include extraction and four beneficiation plants.
Kumba Iron Ore has the huge Sishen facility at Kathu and Kolomela. Assmang, a joint venture comprising African Rainbow Minerals and Assore, mines at Khumani. The company will spend R2.7-billion on upgrading its Gloria mine.
South32 is active in the Northern Cape: Hotazel Manganese Mines is made up of two mines, Wessels (underground) and Mamatwan (open cut), and the Metalloys manganese smelter.
- Council for Geoscience: www.geoscience.org.za
- Minerals Council South Africa: www.mineralscouncil.org.za
- Mintek: www.mintek.co.za
- National Department of Mineral Resources and Energy: www.dmr.gov.za