NewsEast & Horn AfricaTop Mining Companies: Slow crawl of the juggernauts

Wed,22Nov2017

Posted on Friday, 04 March 2016 11:17

Top Mining Companies: Slow crawl of the juggernauts

By Martin Yeboah

Photo©Nadine Hutton/Bloomberg via Getty ImagesAfter a difficult year of cost-cutting, mining companies are now under pressure to reduce their workforces and close unprofitable mines.

Against a backdrop of depressed prices and reduced demand from China, Africa's miners look set for another fraught year.

The major players – mostly headquartered in a South Africa beset by political disputes, labour protests and tepid economic growth – will continue to face pressure to reduce their workforces and close unprofitable operations.

Reduced investment in new production and the shutting down of operations creates a potential silver lining of modest price recoveries, albeit accompanied by risks to the survival of the least efficient and most indebted miners.

In the year ahead, the top gold producers – AngloGold Ashanti (#23), Gold Fields (#48) and Sibanye Gold (#76) – will benefit from a weaker rand but suffer from fluctuating gold prices that are not likely to be far in excess of $1,000-$1,100/oz.

Both Amplats and Impala Platinum (#57) have had to operate in the face not only of low platinum prices, which show little prospect of near-term recovery, but also of labour market troubles.

Confronting the need for further South Africa workforce reductions, reduced 2015 profits and an almost $1bn in potential asset write-downs, Anglo American (#25) is considering the divestment of unprofitable commodity lines.

Meanwhile, South Africa- headquartered platinum producer Lonmin (#150) was unable to convince its shareholders fully to subscribe to a $400m rights issue in late 2015.

South Africa's Impala, also planning a major rights issue and projecting increased 2016 production, still bears the scars from major 2014 strikes that drove significant operating losses.

Iron ore languishes

Anglo American's current stance is that its nickel, coal and iron ore operations need to prove their worth to avoid the chop. With average 2015 per-tonne prices for iron ore less than half of those in 2012 and 2013, 2014's troubles have continued for Kumba Iron Ore (#31), which is majority owned by Anglo American.

Analysts say that average prices are unlikely to recover substantially, if at all, this year. Due to the downturn, Kumba has been restructuring its Sishen mine, has had unfavourable price negotiations with major buyer ArcelorMittal South Africa and has predicted a major cut in 2016 output.

South Africa-headquartered coal miner Exxaro Resources (#107) likewise recorded reduced 2015 earnings and plans workforce cuts and reduced capital expenditures.

Adding insult to injury are recent contract disputes with South Africa power supplier Eskom, reflecting yet another challenge facing South Africa's miners. Gold Fields, for example, has explored the use of non-Eskom renewable energy at one major gold project, while Sibanye Gold is seeking coal and solar power supplies as alternatives to Eskom's costly and unreliable electricity. ●

 



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