As we enter the second decade of the millennium, or approach it (for the purists who remind that the decade actually technically starts with 2011) it is worth briefly considering what has happened in the continent’s mining sector over the past 10 years. I think back to large projects that were touted and look at which ones have materialised.
We have finally started to see the further development of coalfields whose potential was much discussed over the decades, such as those of northern Mozambique and South Africa’s Waterberg region.
We have seen the stabilisation and expansion of Zambia’s Copperbelt, with the development of long discussed projects such as Tenke and Konkola Deeps. What has not materialised is the next big kimberlitic pipe diamond mine in the DRC or Angola, though we have seen vibrancy in sectors once considered marginal such as Lesotho’s diamond fields.
Tanzania’s gold sector remains steady as does that of Ghana, while DRC’s gold potential looks like it is about to be realised with Banro and Randgold looking at substantial definitive projects.
Madagascar’s mineral sands potential is being realised, as is Egypt’s gold potential, though West Africa’s iron ore potential has not evolved as far as projections a decade ago may have indicated. We have seen resurgence in the once dying uranium sectors of Niger, Namibia and South Africa.
South Africa’s platinum and ferrochrome potential has evolved, and even with a disastrous political regime so has Zimbabwe’s platinum potential, though obviously more slowly than it could have.
The decline of South Africa’s gold sector has been predicted for some time and in effect it has been ongoing for several decades. It seemed to accelerate over the past year or so, as the philosophy of deep level mining stocks living on marginal production and a massive quoted reserve that will never realistically be mined was largely abandoned. This is illustrated by DRD, the Roodepoort rocket, giving up on deep level mining to focus on its surface tailings retreatment business while it looks for possible opportunities in Zimbabwe.
At the same time we have seen an intense focus on safety. We have also seen more women taking up careers in mining including underground work. But we have also seen politically charged actions such as the temporary shutting down of shafts for reasons that do little to enhance safety. Since some shafts effectively only made a profit from a couple of days production a quarter, much like retailers, once they lose those days profitable operations change into loss making ones. We have seen labour costs and power availability put pressure on gold operations in particular.
All this has accelerated the decline of gold production in South Africa, but to call the demise of that country’s gold sector terminal is as usual premature. AngloGold Ashanti is planning to spend more than R23 billion on four deep level projects in South Africa which will deliver a combined total of 18.2 million ounces of gold with first production in 2012, increasing to a peak in 2027.
Harmony has completed a series of projects that amount to new mines to upgrade its production and keep it going and Gold Fields continues to build up production at its mechanised South Deep operation. At the same time potential mid-level producers such as Great Basin and First Gold have new mines coming on-stream. Gold mining in South Africa has long been seen as an archaic, unsafe, labour intensive process, but it need not remain so, and signs are that it is evolving into something befitting the 21st century and on a scale that will keep South Africa’s name up among the world’s top gold producers.
We have seen other changes. We have seen the entry of large Brazilian, Chinese and Indian interests into the continent’s mining sector. We have seen the evolution of a junior and mid-tier mining sector in South Africa, and we have seen the introduction of standard methodologies to account for resources and evaluate projects.
There are fewer open conflicts underway across Africa making less of the continent absolute no-go areas for investors. We are seeing an incremental improvement in infrastructure across the continent. There are fewer places where it takes three days of travel to reach. Good governance across the continent leaves a lot to be desired, but there has been in general progress in regulatory environments for mining projects.
Over the past decade we have seen an evolution whereby suppliers of skills, goods and capital to mining projects, instead of shunning much of the continent, are actively gearing themselves to search for new business in the continent’s mining sector.
All this in only a decade.