DON'T MISS : Talking Africa New Podcast – Africa and the US: 'In Africa, people don't take us seriously'

Coronavirus: South African mining losses sealed from lockdown

In depth
This article is part of the dossier: Corona Chronicles: 27 April – 30 April

By David Whitehouse
Posted on Monday, 27 April 2020 12:35

Webp.net-resizeimage (88)
Cullinan mine near Pretoria, February 1, 2019. REUTERS/Siphiwe Sibeko

The partial easing of coronavirus lockdown restrictions is likely too little, too late to save smaller South African miners and supply companies.

Loss-making platinum and gold mines with ultradeep reserves are unlikely to survive, says Indigo Ellis, head of Africa research at Verisk Maplecroft in London.

Top of the list, she says, is likely to be the Implats Rustenburg mine, already under pressure from extended strike action in 2019 and depleting platinum reserves.

READ MORE: Eskom woes cast long shadow for South African mining

Impala Rustenburg CEO Mark Munroe has appeared in court for alleged lockdown violations after calling on some employees to return to work. Some who tried to do so were turned back at police roadblocks. The matter remains under investigation, with Implats saying it has acted legally and responsibly.

Mining operations in South Africa are allowed to restart and produce to a maximum of 50% of normal capacity, subject to having COVID-19 health protocols in place. Ellis says that production levels at 50% is a “pie in the sky target”.

  • This would mean the larger open cast mines opening fully from 1 May, and underground mines resuming 50% of production immediately, she says.
  • “Such a fast ramp up is unrealistic with social distancing measures and negates the fact that a return to Level 5 restrictions, curtailing mine production, is liable as South Africa approaches the peak of the crisis.”
  • The country will move from Level 5 to Level 4 lockdown on 1 May, with some businesses allowed to reopen.

READ MORE: Coronavirus: South Africa to ease lockdown to level 4 as of 1 May says Ramaphosa

Marathon Ahead

South Africa’s Minerals Council says that mining production could return to production levels of over 50% while still containing coronavirus.

  • Yann Alix, head of Ashurst Africa in London, points out that the country’s mining industry is labour-intensive, with workers often operating in relatively confined spaces.
  • Peter Major, director of mining at Mergence in Cape Town, says the idea that production can reach 50% without spreading the virus is “not well thought out, nor justified with any logic.”
  • The figure doesn’t differentiate between underground, open, mechanized and non-mechanized pits, he says.

Ramping up production in South Africa’s deep mines could take a while, as a large number of workers return and need to be tested for COVID-19, says Alix. He sees the possibility of further lockdowns, which may lead to future production disruptions. “With ‘flu season fast approaching, this is a marathon, not a sprint, for South Africa’s miners.” says Ellis.

Gold

Marginal and loss-making gold mines “may find it hard to reopen or keep going,” Alix says. “Especially if they do not have sufficient liquidity to withstand an interruption to operations.”

READ MORE: South Africa: Why Gold has not risen more on Coronavirus

From the perspective of the small-scale producer, higher gold prices can be illusory.

  • Despite the increase in global prices, border restrictions and flight cancellations have created surpluses in many local markets, driving prices down for small-scale miners, Alix says.
  • “Smaller suppliers and service companies are likely face the same if not worse difficulties as the miners themselves.”

Small miners of all kinds don’t have strong enough balance sheets to survive a prolonged lockdown, Major argues. Mining legislation since 2002 has loaded companies with “masses and masses of documentation and administration” and made life even harder for them, he says.

Major sees little hope for consolidation. Normally consolidation is carried out by larger, better financed companies. “But this is not a natural environment in South Africa. The remaining larger companies want to leave or dis-invest, Major says. “They don’t want to pick up more assets in South Africa. At any price.”

Bottom Line: The partial lifting of restrictions is likely to be a false dawn for South Africa’s smaller miners: only the strongest players are likely to survive.

Also in this in Depth:

Coronavirus:  despotism disguised by the pandemic

A report by the UN released on 23 April argues that the coronavirus pandemic should not be used as a pretext for autocratic regimes to crack down on human rights and block the free flow of information, while UN Secretary General Antonio Guterres has said the global public health crisis is rapidly turning into a human rights crisis.

Coronavirus: Nigeria goes home for funds out of fear on COVID-19 impact

The impact of the coronavirus has reversed Nigeria’s plan to borrow from the external market this year, forcing the country of nearly 200 million to seek funding from its domestic markets, on the approval from the country’s senate.

Coronavirus: Bill Gates defends WHO from Trump, gives $11m

Under criticism for his handling of the Covid-19 outbreak at home, US President Donald Trump lashed out.

Coronavirus: Ease sanctions for Zimbabwe and Sudan pleads AU Chair

African Union (AU) chairperson Cyril Ramaphosa has implored the international community to lift economic sanctions against Zimbabwe and Sudan to enable the countries to fight the spread of COVID-19.

Coronavirus: Woolworths small-shop formats well suited to post-pandemic

South African convenience food shopping is a more likely long-term winner from COVID-19 and social distancing than online retail.

Coronavirus: Can those stranded from Cairo to Cape Town come home?

As the coronavirus pandemic keeps most countries on lockdown mode, many nationals stranded abroad are trying to make their way home through the help of their respective governments; but for many, there is no option.

Coronavirus: ECOWAS appoints Buhari as pandemic response ‘champion’

The ECOWAS Authority of Heads of State and Government held an extraordinary session via videoconference on 23 April to discuss the impact of the Covid-19 pandemic on the sub-region. The meeting notably resulted in the appointment of Nigeria’s Muhammadu Buhari as the organisation’s COVID-19 response coordinator.

Coronavirus: Rajoelina’s ‘remedy’ flows freely in Madagascar

A few days after its official launch, President Andry Rajoelina’s Covid-Organics (CVO) remedy is being handed out free of charge in the country’s streets and schools despite questions surrounding the “miracle remedy”.

Covid-19 in Africa: map following the pandemic

For a while untouched by the coronavirus pandemic, the whole continent is now affected by the spread of Covid-19.

We value your privacy

The Africa Report uses cookies to provide you with a quality user experience, measure audience, and provide you with personalized advertising. By continuing on The Africa Report, you agree to the use of cookies under the terms of our privacy policy.
You can change your preferences at any time.