For mining investors, there are still some great projects in Africa, which are, at the moment, undervalued. Two weeks ago, I was able to drive to Francistown –dodging the potholes and the donkeys – and visited Galane Gold. I have been aware of Galane Gold for some time now, and am friendly with the geologist who originally found the disseminated gold deposits in the Tati Greenstone Belt.
What the mine needed before was a committed management team living in Francistown – a team who could give the detail of running such a mine the attention it deserved. This previous owners of Galane, or Gallery Gold as it was formerly known, had their attention focused elsewhere, and the Botswana gold operation never really got the care and attention it deserved.
Turning an operation around that has been somewhat run down is a slow process – often a sort of ‘two steps forward and half a step back’ affair. However, what I saw was that Galane is steadily putting the mine right. A good indicator is the housekeeping and observance of safety, which looked to be spot on.
My journey to Francistown brought back memories from 25 years ago of going down the most dangerous mine I have ever visited. At this mine, in the incline shaft, the skip nearly brushed me off the rickety ladder way. It was a frightening experience.
As a visiting journalist, it is not my job to criticize, but that time I couldn’t contain my astonishment at the lack of basic safety.
Galane, I am pleased to say, with its neat pits, provides a sharp contrast. However, like all other gold miners, it is not being done any favours by the gold price.
However, the price of yellow metals is still disproportionately better than it was in the 80s and 90s, when it bumped along at about $400 an ounce. The trouble as always is that when the gold price spikes upwards, union negotiators make sure that salaries follow suit.
And suppliers are also standing in line for some of the action. What intrigues me is that when the gold price sags, as it does regularly, suppliers often won’t back down on prices and unionized workers don’t opt for pay cuts. And it is high operating costs that often close mines down, not a lack of payable ore.
On a different tack, Mining Review Africa is heartened to see a mining company taking interest in tin once more. In the early 1990s, over-supply and a substantial surplus saw tin prices plummeting. However, more recently, tin has been a star performer on the LME. Bushveld Minerals looks set to be the first mining company to restart tin mining in South Africa, after tin mines such as Union, Rooiberg and Zaaiplaas closed down many years ago.
Years ago, I was at Rooiberg tin with a man who had formerly managed the mine. The then owners of Rooiberg, Gold Fields of South Africa had closed the mine in the face of very low tin prices. My companion explained that if he had the money he would have liked to have bought the mine.
The trouble was that the pay and perks structure of GFSA had killed the mine. “This mine can’t afford to buy its manager a big new Mercedes every couple of years, and it can’t afford to build the sort of houses and swimming pools that are found on gold mines on the West Rand,” he explained.
However, he added that if one could run it with few staff and operate on a tight budget, the mine could make money. I am wondering now if anyone is thinking of reopening Rooberg.
But the point I am making is that many South African mines have not grasped the nettle and have awarded pay increases that were above the rate of inflation. And now many of them are grappling with high-cost mines as well as workforces that are accustomed to double digit pay increases.