MINING INDABA
put a handbrake on economic growth and is a challenge for
the future. The same goes for the rest of Africa. A lot of mining
sites in Africa need to generate their own electricity and
that comes at a huge cost. Infrastructure to support mine-
to-market is often an inhibiting factor; how do we get the
goods out? South Africa has reasonably good infrastructure
to get our iron ore, manganese or coal, but there are
certainly transport constraints and it’s important that mining
companies and the likes of Transnet work together to increase
access to freight rail. You cannot be trucking manganese out
of the Northern Cape to Durban, as our manganese producers
had to do recently, that just doesn’t make any sense.
In other African countries, infrastructure constraints hamper
the ability of mines to develop properly. If we do have bulk
commodities base metals, they generally need substantial
infrastructure to get the product efficiently to the market. But
it entails a concerted effort from the whole continent to get
our infrastructure in place; electricity, freight rail, transport
in general, and harbour capacity to take our products to the
market in a profitable and cost-efficient way.
Do you think Africa as a continent has the potential to
become one of the top mining destinations in the world?
The one thing about mining is that you can only mine where
there are resources. Africa is blessed with fantastic resources.
Our resources – except in the traditional mining territories like
South Africa – haven’t been explored as well as they should
be. That is why you can still find in Africa massive new finds
such as copper, zinc, gold and the likes.
In your opinion, will Africa look attractive for investors
in 2020?
There is a lot of uncertainty in long-term investment. If you
look at the historic trend of capital investment – development
in new projects and increasing capacity of new projects –
then we’ve seen a big decline in capital investment in the
mining industry from 2012 all the way down to 2017. The
year 2018 was the first year we saw a bit of an uptick in that
investment, but it’s still at historic lows.
Although, it’s fantastic that we are starting to see a bit of
reinvestment coming through, there is a desperate need for
additional investment to make the industry sustainable in
the long term. That investment will only come when mining
companies are comfortable that they will be earning a
return on their investment they’ve got a level of stability for
the future. Or they’ll be pricing the risk in and a lot of these
projects won’t get off the ground.
We are seeing a big change in the commodity mix going
forward. At the moment, coal is supplying about 38% of
global electricity – which is a big number. But there is big
pressure to reduce this with the whole focus on being
greener. We are seeing a lot of mining companies starting
to invest beyond their own mining investment, but looking
at the consumer’s needs, looking at how they make their
products greener and more environmentally friendly. We
see that as a trend coming through. We saw that with the
announcement of BHP’s USD400-million investment into
downstream research and projects. Other companies are
getting out of carbon, for example Rio Tinto sold all their coal
assets. You can’t do that when you are a coal only company.
For example, Exxaro in South Africa is investing in agriculture
to deliver value beyond coal.
Globally carbon taxes are starting to have an impact. There
are a number of jurisdictions implementing emission controls
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African Mining January 2020
and taxes which results in a drive away from coal. Investment
bankers are often not funding coal investments anymore. So,
we are sitting with this void on the one side in our developing
world where Africa, Southeast Asia and India still need coal to
provide cheap energy in the short- to medium-term.
What factors are investors looking out for when considering
investing in African mining?
Investors are very short-term focused, so they are looking at
cash generation now. Currently, investors are not giving the
mining industry credit for the profits that they are making.
If you look at the record-level of profits and dividends that
these top 40 global companies made last year, their market
capitalisation didn’t give credit for it. While we say investors
are short-term focused, in the mining industry the brand of
the mining industry is down at the moment and investors
are concerned about the long-term future of mining. They
believe mining is a dirty industry and they believe mining is
not good for the environment and therefore they don’t want
to invest in it.
The global trade uncertainty has created concern around
long-term prices as it is negatively impacting global economic
growth. That means it negatively impacts on the demand for
certain commodities and it creates a lot of volatility in the
developing economies that we have in Africa. In the mining
environment you invest for the long term, so any uncertainty
in the long term creates a bit of concern and increases the risk.
When we have this volatility in prices, you don’t know what
you need to plan against or for, in the longer term.
Unfortunately, consumers who view the mining industry as
negative, don’t seem to realise that the lithium that they need
in electric vehicles comes from mining companies, the gold,
copper, rare earths that you have in your cell phones – comes
from the mining industry.
Your retail investors at the moment are not buying into the
mining industry which is unfortunate. A lot of big corporate
funds are deciding not to invest in coal mining or carbon
energy-type mining or industries because they want to
support a green future. All of that results in a negative outlook
on the mining industry.
Is the mining industry able to add value for its
stakeholders?
I do believe the mining industry can add significant value to
all its stakeholders. This continent has to a large extent been
built on resources, agriculture or mineral resources. If you
look at the history, perhaps the continent did not get all the
value that it should have gotten out of mining. It’s a precious
resource so countries need to manage it as such, and they
need to maximise the value they get out of it. But countries
need to do it on a sustainable basis.
Don’t jeopardise the future for future generations by current
policy making, think long term. We can’t have instant
gratification where governments are looking for big taxes now
at the cost of not having the investment now, and therefore
the future is jeopardised. We also can’t have irresponsible
investment in mining where rehabilitation is not taken care of
and therefore future generations have to pay for the mining
that we do today and the benefits that we take out of the
earth today. Companies, governments and all stakeholders
alike should think sustainable mining, long term future, and
long-term value, to maximise the value for all stakeholders.
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