Mining

Record earnings for miners have been good for the national Treasury.

Credit: Pilanesberg Platinum Mines

Commodity prices buoyed the South African mining sector in 2021. Rhodium palladium, platinum and gold collectively rose in price by more than 50% at one stage during 2021.

Increased demand for platinum group metals PGMs has been a trend for some years, driven by the vital role played by PGMs in reducing pollution in the automotive sector. This was boosted more recently by applications for renewable energy and by supply constraints brought about by Covid-19 with production volumes down and shipping made more difficult throughout 2020 and into 2021.

More than R23-billion in dividends was paid out to Kumba Iron Ore shareholders in July 2021. Interim earnings reached record highs on the back of a commodity price surge that followed the lifting of many pandemic restrictions around the globe. The company paid R9.2-billion in taxes and royalties in the six months to the end of June.

With other mining companies recording similar figures, the government was able to keep paying social grants beyond the time when it thought it would have to scale down on support for people afflicted by the Covid lockdown and the slowing economy.

Share prices seldom deal in irony, but when the coal company that was hived off from Anglo American in 2021 greatly improved its share price in just four months, some wry smiles might well have been exchanged by traders.

Thungela Resources listed on the JSE in June and by early October its share price had increased fourfold to almost R100, giving the company a market value of R13-billion. There was irony in this result because Anglo American had gone to the trouble to promise to support Thungela financially until the end of 2022 if thermal coal prices did not hold up. With many companies getting out of coal and the global investor community under pressure to divest from fossil fuels, a new coal company seemed like a long shot. But the economic growth surge that followed the lifting of lockdown regulations caught energy planners by surprise. With not enough renewable energy yet on stream, the world started scrambling for energy sources. Cue Thungela Resources, the new owner of Anglo American’s thermal coal assets in South Africa.

Other news in 2021 from Kumba Iron Ore was the appointment as CEO of Mpumi Zikalala, currently the managing director of De Beers Managed Operations, who became the first woman to head the company. In 2020, Amplats announced the appointment of Natascha Viljoen as CEO. An organisation called Women in Mining (WiMSA) aims to empower women in the South African industry, giving them a platform and a network. Current chairperson Petro Du Pisani is Head of Business Improvement Projects at Anglo American. A previous chairperson, Thabile Makgala, is the Executive: Eastern Limb at Implats.

SECTOR INSIGHT Northam buys a stake in Royal Bafokeng Platinum.

Sales and profits

PPC Lime has changed hands. A transaction for R515-million was expected to be concluded by the end of 2021, with the Kgotelopele consortium taking over ownership. The new owners see the green economy as advantageous to the company’s future.

Harmony Gold expects to spend R2.3-billion in 2022 on capital expenditure in South Africa. The Zaaiplaats project in Limpopo and a tailings project between Klerksdorp and Potchefstroom in the North West are the major areas of focus. Together with a project in Papua New Guinea, the new initiatives will allow Harmony to continue to produce 1.4-million ounces of gold until FY 2027 (Mining Weekly).

Coal giant Exxaro has disposed of its stake in Tronox Holdings (mining and processing of titanium ore, zircon and other minerals) but has taken full ownership of renewable energy company Cennergi, owner of two wind farms in the Eastern Cape. Exxaro has tasked Cennergi with installing renewable energy plants at its mines.

In March 2021, Implats announced headline earnings of R14.5-billion, an increase of 328% over the previous year and a reflection of all of these trends. Implats intends expanding production at its Two Rivers PGM mine by 180 000oz. The project will take four years and cost R5.7-billion.

In the fourth quarter of 2021 Northam Platinum Holdings announced a deal to secure a one-third stake in Royal Bafokeng Platinum.

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. 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.

De Beers is expecting its Venetia underground project to start delivering its first ore in the second half of 2022. Investment in the project will amount to about $2.1-billion. The investment is expected to extend the life of the mine to 2045 and possibly beyond that date.

Afrimat continues to expand its commodities portfolio. Previously focussed on construction materials, Afrimat bought a 27.27% stake in a high-grade anthracite mine in Mpumalanga, ONLINE RESOURCES

Council for Geoscience: www.geoscience.org.za

Minerals Council South Africa: www.mineralscouncil.org.za

National Department of Mineral Resources and Energy: www.dmr.gov.za

Coal prices surged in 2021. Credit: Thungela Resources 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 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. 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 openpit 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 harbour at Boegoebaai. Part of the strategy involves the creation of a commodities corridor linking the Upington Industrial Park with the port. ■

Finding the right pace to transition to clean energy

DMRE Deputy-Director General Ntokozo Ngcwabe explains how a drive to promote exploration is proving that mining is the opposite of a sunset industry.

Ntokozo Ngcwabe

What are the Department of Mineral Resources and Energy’s main priorities? Energy security is at the very top of our list in terms of electricity and fuel. The minister has been announcing bid windows and those are all geared towards increasing megawatts that flow into the grid. We are adding megawatts to the grid to support Eskom and to support our economic growth goals. With fuel, we have to ensure that we keep a certain level of strategic fuel stock at all times for the country. We are doing a lot of work on the policy front to ensure that as we drive energy security, we also follow the just energy transition path.

What are other policy issues? The minister recently gazetted regulations for clean fuels. We need to be investing in clean energy technologies and clean coal technologies to ensure that as we exploit our resources, we do so in a responsible manner that ensures that we meet our sustainable development commitments.

Is a commitment in terms of local content something you expect from bidders? It definitely is. At this point renewable energy generation components are not manufactured locally. As we progress with this programme, localisation is something we want to see as opposed to components just being brought in for assembling in South Africa. Our aim is to ensure that we create jobs as we walk our just energy transition journey. Further down the line, we then want to move into industrialisation and massifying in terms of job creation.

BIOGRAPHY

Ntokozo Ngcwabe is the Deputy Director-General in the Department of Mineral Resources and Energy. She is responsible for Policy, Global Relations and Investment Promotion and has 22 years of experience in the minerals and energy sector. Her responsibilities include promoting investments into the entire value chain in both mining and energy, and building and growing partnerships in the two industries. What are the opportunities in respect of the world’s demand for minerals and metals that will assist the transition? We are ranked the highest country in the world with the biggest resources of platinum group metals (PGMs). We are looking to drive the markets for PGMs but we are also following what is happening with electric vehicles. State-owned entities like the CSIR and Mintek have done a lot of work and are investing in fuel cell technology. The entire Minerals Council building in Johannesburg is powered by fuel

cells. How do we massify commercialisation of that technology so that we drive demand for PGMs but also make our own contribution in terms of the clean energy revolution? Our research institutions are at the very front of that work. The Council for Geoscience is also undertaking a mapping programme that is focused on minerals of the future, ie battery minerals.

What are some concrete steps? We are in the early stages of looking at how we advance on the implementation of these technologies, for example powering our government buildings using smart clean technologies. From there, the aim would be to massify and grow. With greater demand you bring the price down as price is still a challenge. We know that as we invest more and more we will create and grow the market thus driving accessibility and affordability of these technologies.

What is the future of coal in South Africa? Interesting question. South Africa is well endowed with coal and we are not going to wish it away. Let’s look at this subject holistically and realistically. South Africa’s energy generation basket is over 90% coal fired. It’s not realistic for South Africa to say in the short term we’ll get rid of all 16 power stations.

There is provision for coal in the IRP, but the main focus is that new capacity is going to be in clean technologies. Our position is that as we mine and burn this coal to generate power, let’s deploy clean technologies; this will provide the baseload which we can never have from renewable energy sources.

Pace is important in this conversation. The very essence of “just transition” is that it’s a process of moving from one stage to the other. It’s not a flip over that will happen overnight. The burning issue for me is I’d really love to see us having a balanced conversation about the just energy transition and the fact that South Africa needs to work on a South African solution at a rate and scale we can effectively manage and afford. We are signatories to the Paris agreement, and we remain committed to climate change and fulfilling our obligations. But let’s take a balanced view on this subject.

How does the DMRE see the zinc operations in the Northern Cape? The Northern Cape is a strategic province in that it is under-explored. It can drive growth and help increase the contribution of mining in job creation and percentage of GDP. We are really putting our energies into driving exploration in that province. But it’s not only the zinc projects. A huge deposit of copper has been discovered in that area. These are commodities that are also critical for the future.

Is the DMRE taking steps to expand exploration? DMRE, the Minerals Council and other stakeholders have developed an exploration map for South Africa which is currently going through the approval processes. It’s a specific goal to attract 5% of global spend on exploration, because we currently attract about 1%. If you don’t explore you won’t create new mines and will therefore not grow. Some people say mining is a sunset industry but that’s based on gold mining that is declining. There are other areas and new minerals and we want to turn our focus to those. The saying that if it’s not grown, it’s mined cannot be over emphasised, therefore if we want to grow our economy, we must invest in new mining projects.

How is the process going towards regularising Zama Zamas? There are two aspects to it. There are criminals and the South African Police Service is dealing with them, but there are also so-called “illegal” miners where you find old ladies with picks and shovels who don’t know that this is an illegal activity. We want to assist people we are calling artisanal miners.

We have drafted an artisanal mining policy which will be gazetted for public comments before the end of this financial year. We want to have a specific set of rules that’s customised and where they don’t have to meet the same requirements as the big mining houses. They will have their own processes and we’ll make sure they are regulated. They could contribute hugely to job creation and to the fiscus in terms of taxes and royalties.

Does the department have a graduate placement programme? The DMRE has an extensive programme that covers a whole range of skills. Our SOEs like the Council for Geoscience also take graduates and mining companies are giving them experiential learning at their operations. This has been the tradition in the mining sector in South Africa; for example, the new CEO of Kumba Iron Ore, Mpumi Zikalala, started as a bursar and today she sits at the very top of the company. ■