Mining accounts for nearly 60% of SA’s exports – PwC
Its gold mining chapter may be coming to an end, but SA is well positioned for the energy revolution, given its abundance of related metals and rare earth elements It’s sobering to think that SA, once the world’s leading producer of gold and now ranked number eight behind Kazakhstan and Mexico, has roughly 27 years of gold reserves left. That’s according to the PwC SA Mine report for 2023.
Equally sobering is the fact that minerals accounted for R575 billion, or 58 percent of total exports, in the first six months of 2023.
The outsized contribution of mining to foreign currency earnings and the balance of payments was achieved despite power outages and a dreadful performance from state-owned ports and rail operator Transnet. It’s been estimated that Transnet’s inability to freight goods to port costs the country R1 billion a day, equivalent to 5 percent of GDP (on top of an estimated 10 percent loss to GDP in 2022).
All this makes the mining sector’s performance against frightful odds look especially heroic.
Other challenges facing miners include above-inflation cost pressures, volatile commodity prices and currency exchange rates, illegal mining and a critical skills shortage – not to mention a dysfunctional cadastral system for identifying and securing mining rights. Until that’s fixed, little in the way of exploration is likely to happen.
Gold reserves
Andries Rossouw, PwC’s Africa energy, utilities and resources leader, says while these factors have eaten into profits, miners’ strong balance sheets allowed them to increase investments into operations and pay dividends. “Considering these challenges and investors having investment options other than South Africa, an important question arises: How many years of mining can South Africa expect to have for certain key commodities; gold, coal, iron ore and platinum group metals?” asks PwC.
Most SA commodity producers have a degree of flexibility in converting exclusive resources to reserves, which allows them to build a healthy pipeline for the future. Not so with gold, however.
SA has about 68 Moz (million ounces) of gold reserves, of which 84% are in Gauteng, the rest scattered between Mpumalanga, Free State and North West. Annual gold production is now at around 2.56 Moz, with 61 percent of this coming from Gauteng’s 10 mines currently in operation.
Total gold reserves for the province are 56.88 Moz, more than half of which is attributable to a single mine, South Deep, which has an expected life of mine of up to 95 years. Exclude this from the calculus, and the remaining mines have just 21 years of mining from the remaining gold reserves in their portfolios.
The Free State has just six years of gold mining left at current depletion rates. In Mpumalanga, it is 16 years and 18 years in North West. All told, gold mining in SA will all but come to a close after 27 years at current depletion rates. Then comes the challenge of mine rehabilitation, reskilling the thousands of miners no doubt laid off due to mine wind-downs and a possible flurry of restructurings and deals among the scraps of mines remaining.
What about coal and PGMs?
The coal miners concentrated in Mpumalanga and Limpopo have roughly 41 years of mining left based on current rates of depletion. Export coal prices have fallen by more than half from the giddy levels of 2022, when the Ukraine-Russia conflict commenced.
For platinum group metals (PGM) producers, based predominantly in Limpopo and North West, reserves from operational mines amount to 261 Moz 4E (platinum, palladium, rhodium and gold, usually found in combination), giving an estimated 38 years of mining at current depletion rates. South Africa is well positioned for the coming ‘green energy revolution’, given its abundance of copper, PGMs, nickel and rare earth elements used in renewable power systems and electric vehicles.
“Demand for energy minerals is rapidly surging,” says the PwC report.
“By way of example, projected 2030 supply deficits of lithium will total 2,5 times current world production. For cobalt, the supply gap amounts to 1.5 times current world production. It will be a challenge for miners to keep up supply. Doing so without taking sustainability shortcuts will be even harder.”
SA’s regional dominance in green energy metals
While global pressure is building for the green energy revolution, there are no easy choices: mining and beneficiating the increasingly large amounts of minerals needed to build batteries, photovoltaic panels, wind turbines, fuel cells and hydrogen electrolysers results in new and significant environmental, social and governance challenges, says PwC.
This presents SA with numerous opportunities to diversify the economy and drive future prosperity, given its abundance of key minerals needed to drive this revolution.
Read/listen: Green hydrogen: An ‘opportunity to completely reindustrialise SA’
If SA focuses solely on mining, it will allow others to capture the value chain. It behoves local lithium producers, for example, to invest in global battery plants to extend value chain exposure in the next few years.“This may practically mean Southern African miners buying into Asian plants producing battery active materials and battery cells,” says PwC.
“Metals would be sourced from Southern Africa, processed overseas, with interim products returned for final assembly and finishing in Southern Africa. Similar partnerships around iridium and platinum for use in hydrogen technologies should be considered.”
Source: https://www.herald.co.zw/