South Africa remains one of the best mining jurisdictions in the world with over $2.5 trillion mineral wealth still in situ.
This is an edited version of the South African Department of Minerals and Energy Minister, Gwede Mantashe's address at Africa Downunder.
As things stands there is no country that can match South Africa in terms of mineral diversity offerings, we are number one and we are here to say we are open for business.
The prices of majority of metals and minerals have somehow recovered in the first quarter of 2019 from the declines experienced in 2018, with precious metals increasing by an average of 6%, and base metals posting an average of 8%.
Metals and mineral demand is expected to remain subdued for the rest of 2019 on the back of weaker global economic growth and the worsening US-China trade war.
However gold prices will continue to increase, amid the geo-political uncertainty.
The gains observed in the first quarter will be offset by these negative market dynamics, therefore metals and minerals prices are projected to be 2% lower in 2019 compared to the previous corresponding period.
South Africa’s mining industry is one of the key economic sectors in the country, contributing about 7.5% to gross domestic product (GDP), 30% of export earnings, and over 450 000 direct jobs.
Statistics South Africa released quarter two GDP results which indicate that the economy grew by 3,1% in this quarter of 2019 with the mining industry being the biggest contributor at 14.4%, this is the strongest growth since the second quarter of 2016. Iron ore, manganese and coal were the main contributors to this growth.
Coal being the highest contributor at 28% is testament to the fact that South Africa is still well endowed with coal resources. We depend largely on coal-generated electricity and that is going to be so for a number of decades to come.
Our power utility, Eskom, continues to play a significant role in ensuring energy supply, however in recent years it has experienced challenges related to securing the right quality and quantities of coal at fair market prices.
South 32, a diversified coal miner in South Africa has sold its coal assets to Seriti Resources. This sale has a positive spin in that, following this transaction, Seriti will become the second largest Black-Owned coal miner in the country.
It however has a negative aspect in that BHP Billiton is pulling out of coal mining and therefore retracting on a debate that coal is dirty and destined for death. Our reality is that we still have a lot of coal in South Africa and we will not wish it away. Let us rather have a conversation about cleaner coal technologies.
Second after coal, are the PGMs which account for 19% of South Africa’s mining revenues with 63 000 tonnes still in situ. Government aims to convert this comparative advantage to a strategic competitive advantage by developing and enhancing the hydrogen economy within South Africa.
Mintek and CSIR are tasked with research, development and innovation along the value chain of hydrogen fuel cell technologies.
These institutions have successfully developed these technologies and we are currently working on commercialising them with a view to support the national grid with additional alternative cleaner energy capacity.
While commodities like gold are in decline, the demand for base metals like zinc, copper and nickel is projected to increase in the near future on the backdrop of the planned global infrastructure development projects and growing demand for battery metals.
As such, base metals are the “newly revived” commodities in the South African mining space and present huge opportunities for growth.
Copper mining has been revived by Orion’s Prieska Copper-Zinc Project in the Northern Cape Province and projections are that with the production rates and good grades as indicated by feasibility studies, the R4 billion project will be paid back in less than three years.
These discoveries and the revival of mining of copper and nickel in some parts of the country provides a good “replacement pipeline” for the depleting minerals which have been mined for over 130 years in the country.
They are also an indication that mining is indeed a sunrise industry in South Africa and that the gold decline should not be interpreted to mean the death of the entire mining sector in South Africa. As we continue discovering new minerals, we grow the prospects of mining in South Africa.
We aim to increase our share of the global exploration expenditure from the current 1% to over 5% in the medium term. To expedite exploration activities, we are, through the Council of Geosciences undertaking a 10 year intensive mapping programme which will produce detailed geological maps on a scale of 1:50 000.
In 2018, South Africa’s mining sector received over US $3.2 billion in investments which resulted in the creation of about 5000 jobs. Some of these investments came from lead and zinc, coal, diamonds, copper, heavy mineral sands and manganese sectors.
Furthermore, there are about 60 projects that are currently in the pipeline with an estimated value of US $7.8 billion and potential job opportunities of over 30 000 in the medium to long term.
The investment inflows to South Africa’s mining industry form part of implementing South African government’s vision of attracting US $100 billion to the economy within five years.
South Africa has been at the centre stage of mining for over 130 years, we still have more to offer.