African Mining May 2020 | Page 47

MINES LOOK AT INTERNAL DAMAGE CONTROL Paul Runge of Africa House looks at internal measures mining companies have taken in the aftermath of Covid-19. There has been much media coverage of the announcements by mining companies operating in South Africa relating to reduction of operations, the placing of mines under care and maintenance and pledging of donations of a substantial percentage of their executives’ salaries and sometimes those of workers too, to funds dedicated to dealing with the effects of Covid-19 virus. There has also been coverage of the medical and hygiene measures being taken by the companies through their mine hospitals and through their facilities such as the stocking of their change rooms with gloves, goggles, gloves and other protective items. The announced nine-point Covid-19 plan of the Minerals Council South Africa reinforces these medical and hygienic initiatives of the mining houses. Less attention appears to have been paid to what the companies are doing internally to mitigate the negative financial effects and consequences of the virus. A study of the numerous company announcements on what they are doing individually to reduce the ill effects of the virus may provide useful, practical insights. Cross-functional teams comprising of relevant divisions have been set up to guide and coordinate company response to Covid-19. These teams have helped formulate decisions such as the declaration in some cases of force majeure on customer, supplier and freight contracts and the suspension of agreements. The objective is to cut capital expenditure by identifying priority items and reducing procurement of nonessentials. The need to scale down operations and to operate at a minimised level is strongly realised. Cash conservation measures have been reinforced and there are efforts to improve cash flow. Reserve accounts are being drawn upon. The sale of assets is in some cases being considered albeit that in the present uncertain climate, it is difficult to determine and secure the value of such assets. Company executives are consulting their financial divisions and advisers on the possibilities of additional tax and incentive relief although mining specialists indicate that these are difficult to secure in this particular sector. On the personnel level, mining companies have temporarily reduced staff to include only critical personnel to maintain prioritised and continuous operations. There is particular emphasis on supply chain management and supply chain teams have been instructed to order and build selected priority stocks. Equipment for mechanised operations is particularly necessary in that these operations can be continued with the use of minimal staff. Some of the companies have developed interesting innovations. An example thereof is the use of remote surveying of mines using satellite photography and drones. At the time of writing, the Department of Mineral Resources and Energy has permitted the mines to recommence operations at 50% production capacity. Companies are trying to ensure the ramp up to full production after the ending of the lock down. The mining sector is an important earner of hard currency for the country and gold still accounts for about a third of the value of its exports. Mining could therefore be a vital post-virus stabiliser. • www. africanmining.co.za African African Mining Mining Publication African Mining African Mining • May 2020 • 45