A South African
mine at sunset
Johannesburg, South Africa — 15 March 201 – South African mining production rose 7.3% in January‚ marking the sector’s first month reflecting a year-on-year increase since September 2012‚ although Nedbank “’ one of the country’s “big five” banks “’ warns of a tough road ahead.

Fin24 reports that the January increase follows a fall of 8.9% year-on-year in December (revised from a 7.5% fall).

Data released by Statistics South Africa showed that total mining production was 3.1% lower in 2012 than in 2011.

Mining output figures have been closely watched for indications of whether the sector was recovering from the widespread strikes of the third quarter last year. “The road ahead still remains uncertain for the sector‚” Nedbank said.

“Locally‚ tough operating conditions still persist and globally commodity prices are not likely to make significant gains as demand conditions remain relatively unfavourable. The latest mining figures don’t mask the fact that overall economic activity remains sluggish,” the bank added.

Standard Bank is forecasting “lacklustre“ growth from the sector in the first quarter of 2013‚ though it expects conditions generally to improve. On the costs front‚ it said the smaller tariff hike granted to Eskom would be a reprieve for industries including mining.

“We are likely to see bouts of labour strikes in the mining sector this year but not at levels seen in 2012‚” the bank added in a release.

“Significantly‚ there seems to be better communication between miners and unions,” it said. “Towards the end of 2012‚ mining unions in the coal sector and the Chamber of Mines signed a new wage agreement. Such agreements should help avert future wage disagreements in coal mining.”

The bank also pointed to possible productivity improvements‚ saying: “Mining companies are also considering working more than the current 264 days a year‚ and closer to 365 days of the year. This should increase output and help with the normalisation of production.”

Stats SA said the highest positive growth rate in January was seen in diamonds‚ where output surged 55.8%‚ followed by building materials‚ up 35.3%; iron ore‚ up 33.4%‚ and manganese ore‚ up 20%.

Iron ore was the main contributor to the overall 7.3% production increase‚ accounting for 4.8 percentage points of the rise‚ with diamonds and coal each contributing 1.1 percentage points.

On the down side‚ gold pulled the number down by 1.3 percentage points‚ with the “other metallic minerals” category was the only other negative contributor‚ at 0.7 percentage points.

Mineral sales fell 3.3% year on year in December‚ with nickel experiencing the largest fall‚ at 21.2%‚ followed by gold’s 16.2% drop‚ a 13.1% fall in chromium ore sales and a 10% fall for platinum group metals.

Source: Fin24. For more information, click here.