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This month… Mining

By UNKNOWN
Posted on Thursday, 27 May 2010 13:12

Each month we focus the spotlight on the latest sector or banking region, accompanied by an interactive list of

Africa’s top players drawn from our two annual rankings, the Top 500 Companies and Top 200 Banks in Africa. We’re also highlighting related articles from our free Archive.

This

month we are focusing on Africa’s miners, who are benefiting from the booms and busts in international ore prices.

Everything depends upon individual commodity prices in the mining sector. During the economic downturn, the prices of minerals such as diamonds collapsed – taking with them the performance of top African mining companies like De Beers – while gold and platinum miners have been riding a wave of ever-higher prices into 2010.

Gold prices rose by 25% in 2009, while platinum prices increased 59% after a steep decline in 2008. Copper, which was trading at $3.15/lb in 2008, struggled to break through the $2 mark in late 2009. By mid-2010, copper futures were selling for more than $3/lb. Although some ore prices have made rebounds in 2010, the Eurozone crisis and warnings of a cooling Chinese economy are causes for concern.

Many African copper producers are diversified multinational companies that can minimise risk from swings in single sectors. India’s Vedanta Resources was one of many companies in the Zambian copperbelt that reduced production in 2009 to limit losses due to lower prices. Its $1.3bn revenue for the third quarter of the 2008/09 financial year was down 31% compared with the previous quarter. Its Zambia operations produced only 25,000tn of copper cathode, compared with 38,000tn in the second quarter. In order to increase its diversification, Vedanta spent $1.3bn in May 2010 to buy Anglo American’s zinc mines in Namibia, South Africa and Ireland.

As international financial concerns pushed more money into gold – demonstrated by recent purchasing behaviour by India and China – gold miners across the continent have poured more money into expanded production. South Africa’s Gold Fields, the world’s fourth-largest gold company, increased its production by 15% over three quarters of the 2009 financial year to 906,000 ounces. In the year ending June 2009, Gold Fields’s revenues increased by 26% to R29.1bn ($3.9bn) from R23bn in 2008, leading to an increase in operating profit of R2.5bn. A group of nine banks are backing the company’s expansion plans and extended a three-year, $450m credit line in late May 2010.

In December 2009, De Beers, which has consistently appeared in the highest ranks of our Top 500 African companies, was left asking its three biggest investors – Anglo American, the government of Botswana and the Oppenheimer family – for a $1bn bailout. Net debt rose to $3.3bn in mid-2009 on the back of capital spending on new investments in Canada and cash-flow problems which have led to more bank borrowing. The bailout enabled De Beers to renew its $3bn credit facility and avoid much more serious problems. After shutting down several of its African operations in early 2009, De Beers still had negative cash flows of $100m for the first half of the year. In May 2010, De Beers shareholders were quietly discussing the possibility of listing on the stock market in 2011.

De Beers managers decided on a new strategy to cope with the global downturn in 2010. The company is ramping up production in the short term: in the first quarter of 2010, De Beers mined 7m carats of diamonds, compared to 1m for the same period in 2009. However, the diamond miner’s medium-term strategy is to reduce production as there have been no large discoveries to boost the company’s reserves. De Beers said in April that it would cut production levels to 40m carats in 2011, down from 48m in 2008.

As a result of price swings, South Africa’s platinum producers returned dire results in 2009 and big earning turn-arounds in 2010. In August 2009, Anglo Platinum’s headline earnings were down 95% and Impala Platinum’s (Implats) decreased by more than 50%. Not only had Implats’s costs risen, but production from new projects was lower than expected and overall production has been stagnant, at 1.26m oz over the last nine months.

Financial bosses have had to cut R10bn from the capital expenditure programme through to 2013. However, things were looking up in May 2010 when top platinum producer Anglo Platinum announced that earning per share would increase by 20% year-on-year by June due to strong platinum prices.

MINING RANKING

A list of Africa’as biggest miners, taken from our interactive annual list of Africa’s Top 500 companies, published in the February-March 2010 edition of The Africa Report.

Rank 09

Rank 08

Company name

Country

Sector

Turnover (Thds $)

Turnover change

Net profits

6

45

OFFICE CHÉRIFIEN DES PHOSPHATES

MOROCCO

MINING

7492116.62

157.78%

2916916.12

7

12

DE BEERS CONSOLIDATED MINES

SOUTH AFRICA

MINING

6888000

0.76%

279000

13

11

ANGLO PLATINUM CORP.

SOUTH AFRICA

MINING

5363322.25

-22.86%

1505195.55

25

21

IMPALA PLATINUM HOLDINGS

SOUTH AFRICA

MINING

3974447.35

-14.73%

1859017.4

36

30

ANGLOGOLD ASHANTI

SOUTH AFRICA

MINING

3145623.1

-12.86%

-1701493.25

38

42

DEBSWANA DIAMOND CO.*

BOTSWANA

MINING

2966760

0

46

44

GOLD FIELDS

SOUTH AFRICA

MINING

2430953.68

-16.62%

470934.88

54

69

KUMBA RESOURCES

SOUTH AFRICA

MINING

2256684

32.58%

761525.2

56

61

LONMIN

SOUTH AFRICA

MINING

2231000

14.94%

566000

84

EXXARO RESOURCES

SOUTH AFRICA

MINING

1462512.95

359738.25

87

125

AFRICAN RAINBOW MINERALS

SOUTH AFRICA

MINING

1364892.35

46.15%

522650.55

88

95

COMPAGNIE MINIÈRE DE L’OGOOUÉ

GABON

MINING

1338795

9.63%

378585

91

90

ENDIAMA

ANGOLA

MINING

1300000

0

113

113

KONKOLA COPPER MINES*

ZAMBIA

MINING

1017206

301329

117

86

HARMONY GOLD MINING CO.

SOUTH AFRICA

MINING

973036.5

-28.16%

-25884.25

119

178

ASSORE

SOUTH AFRICA

MINING

967641.69

52.24%

324295

140

198

SOC. NAT. INDUSTRIELLE ET MINIÈRE

MAURITANIA

MINING

838000

50.45%

321000

167

165

NAMDEB DIAMOND CORP.*

NAMIBIA

MINING

683205.12

21415.68

201

TARKWA MINES

GHANA

MINING

550302

82228

220

126

PALABORA MINING CO.

SOUTH AFRICA

MINING

486473.88

-46.81%

76019.3

248

199

NORTHAM PLATINUM

SOUTH AFRICA

MINING

410570.37

-25.85%

630861.93

256

333

SOC. D’EXPL. DES MIN. D’OR DE SADIOLA

MALI

MINING

396208

47.89%

79734

275

290

SOCIÉTÉ DES MINES DE MORILA

MALI

MINING

370586

16.09%

117129

326

358

MERAFE RESOURCES

SOUTH AFRICA

MINING

293844.77

19.87%

108575.55

356

321

GROUPE MANAGEM

MOROCCO

MINING

260409.57

-9.95%

0

359

349

METOREX

SOUTH AFRICA

MINING

257629.53

2.14%

58588.42

361

INDUSTRIES CHIMIQUES DU SÉNÉGAL

SENEGAL

MINING

257162.21

0

404

SOCIÉTÉ DES MINESDE L’AÏR

NIGER

MINING

224406.5

0

426

287

DRDGOLD

SOUTH AFRICA

MINING

204236.98

-37.57%

105231.73

460

EL NASR MINING CO.

EGYPT

MINING

175387.5

83401.98

467

DAMANG MINES

GHANA

MINING

172196

15725

2008 RESULTS IN THOUSANDS OF DOLLARS – *IN ITALICS 2007 RESULTS – ND: NO DATA

A version of this article was originally published in the February-March 2010 edition of The Africa Report.

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