The veteran mining analyst and director of mining at Modern Corporate Solutions, Peter Major says South Africa’s mining industry is “crawling on the floor” while mining in Australia, Canada, America and the rest of Africa is on a conveyor belt.
“We didn’t just fall on the floor; we’ve gone backwards because we lost over 480,000 gold miners alone. We’re on a conveyor belt going backwards.”
“When [then finance minister] Trevor Manuel leaked the document to try to prepare the world and tell everyone it was not as bad as it seemed, the mining index dropped 32% and the all share dropped around 25%. And that was just him testing the water, in effect asking for industry’s buy-in to tone it down. Two years later, when it was officially released, indices dropped almost as much again because it was close to as toxic as the pre-release was.”
“In effect it nationalised the mines, which had 75- to 100-year ore bodies. A mining licence was only good for 25 years, a third of the life of the ore body, and only granted when “ludicrous” BEE boxes were ticked. It was only 25% BEE ownership then, but 70% of the mines’ purchasing had to come from BEE suppliers, which often imported the product from China while local producers had to close shop and retrench thousands.”
“Zambia nationalised the mines and the result was catastrophic, but they didn’t have the BEE component like South Africa did,” Major said.
In terms of jo creation and meaningful investments, Major said that policy decisions over 30 years have consequences. “If you keep out investment, you lose jobs.”
“The industry peaked at about 850,000 jobs in the late 1980s. Now it’s down to about 475,000. Gold mining jobs have gone from about 575,000 to around 85,000.”
“Mining’s direct contribution to GDP hovers between 5.8% and 6.1% in spite of a commodity boom and a gold price that has gone from $300/oz in 2003 to $3,000. “We’ve been in the greatest commodity boom the world has ever seen. A 22-year super-cycle, and our industry is dying,” he added.
In terms of the layers of the legislation, the Mineral Resources Development (MRD) Bill approved by cabinet last year for public comment shows the government has learnt nothing since the MPRDA was unleashed on the industry in 2004, Major stated.
On life support, Major said that in spite of huge potential, the industry is on its last legs. The MRD Bill is “more than enough to strangle it forever”.
“There’s still 48,000 tons of gold underground with good ore grades “that we know about”. A lot of data pertaining to other potentially rich ore bodies was lost or dumped as companies pulled out of South Africa. The odds of getting any of that 48,000t of gold are minuscule, says Major. Nobody has sunk a major shaft for more than 20 years. “I’d be amazed if any of our deep shafts are going 10 years from now.”
“The monumental increase in the gold price since 2003 has had no effect in slowing down job losses on the mines and no effect at all on sinking new shafts and building new mines. And these are mind boggling gold prices.”
