COUNTRY IN FOCUS •
amended to cater for potential future long-term periods as
a result of factors that could include pandemics to extreme
weather forced curtailing of production.
The marketing and auction approach may also experience
a quick change. A number of precious stone auctions have
started to move to virtual auctions, or flexible tender sales. It
is still to be determined how the buyer market will react and
what their levels of satisfaction will be.
The lockdown period panic also saw a tug-of-war between
gold and the US dollar for investor’s confidence. Gold appears
to have retained its safe haven status in developing countries
where the domestic currencies suffered serious losses against
the major currencies on the exchange market.
The recovery of the ferrous and non-ferrous metal markets will
to a large extent depend on how fast the Chinese and Indian
manufacturing sector returns to full production. For some
small producers of iron, the good times of high iron ore prices
may be over for the time being, but chrome and ferrochrome
producers may benefit. The precious metal and gemstone
market segment might struggle to recover from the lack of
luxury purchases being made during the lockdown periods.
Impact on South African mining
Historically, there are a number of critical tipping points, and
the global lockdown in response to the Chinese Covid-19
pandemic is bound to be recorded as one of those moments.
The African mining sector and specifically the South African
mining sector are bound to suffer the consequences over the
long-term.
The lockdown added to the woes of a country that was already
projected to experience minimal growth, downgrading
to investment junk status, the prospect of prolonged
loadshedding, political movement towards expropriation
without compensation and nationalisation of the Reserve
Bank, failing state-owned enterprises (SOE) and increasing
unemployment levels. Although mining is not the main
contributor to most countries’ GDP, is remains one of the pillar
sectors for employment, both direct and indirect. Mining has
also been identified by the South African government as a key
industry to recover the economy after the lockdown period
and this is echoed by Australia and others.
Mining was not deemed an essential service during the 21-
day lockdown period in March to April 2020. These measures
necessitated mining operations to put their operations in
care-and-maintenance, in such a way that the minimum
ramp-up time would be required to bring the operations back
into production once restrictions have been lifted. Production
during this time was limited to keeping critical infrastructure
in operation, but limited in most cases to processing stockpile
material or reprocessing to keep the plants in operation. A
smaller number of operations halted operations completely.
It is however clear that most mining company do not have
contingencies in place in their business continuation plans to
handle prolonged shutdown periods, as a result of pandemic
emergency measures or extreme weather. Mining companies
will spend the next couple of months engaged in remedial
and de-risking planning meetings.
Major mining companies also responded to the crisis by
immediately issuing force majeure notifications. The effect of
this will wreak devastation on the small vendors, contractors
and consultants to these companies. Payment terms by mines
to service providers can already be as long as 120 days. Unless
better terms can be agreed upon, a significant number of
these businesses will potentially have to apply for business
rescue. In turn this may result in shortfalls of supplies and
services at mining operations, impacting on productivity.
Fortunately, direct immediate job losses in the mining sector
have not happened yet, it was considered illegal to conduct
lay-offs and retrenchments during this lockdown period with
additional pressure from the labour unions.
Leon Louw
Open cast mines could start operating at full throttle after the five-week initial level 5 lockdown
announced by President Ramaphosa in late March 2020.
www. africanmining.co.za
African Mining Publication
African Mining
African Mining • May 2020 • 21