South African mining industry resilient despite challenges piling pressure on operational costs

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By Zablon Oyugi

The South African mining industry has proved its resilience through its marginal but significant contribution to the country’s Gross Domestic Product (GDP) in 2023 as evidenced in the 1st and 2nd quarter statistics.

This is despite challenges such as high energy prices, high inflation, lower commodity prices, coupled with loadshedding and logistical bottlenecks that has continued to put pressure on operational costs and thus constrained to bare minimum the mining industry’s contribution to our economies.

According to Hon. Gwede Mantashe, Minister of Mineral Resources and Energy, the government is investing efforts and resources to resolve these bottlenecks through the National Energy and Logistics Crisis Committees comprised of private and the public sector.

“The year 2023 proved to be a tough year for Africa’s mining industry due to a myriad of international and domestic factors. However, we have decided to give investors a balance sheet of South Africa’s mining industry and point to investors opportunities in the South African mining industry,” said Mr. Mantashe in his welcoming speech during this year’s Investing in African Mining Indaba event in Cape Town ICC.

New mining and extensions of existing mining operations

He indicated that over the past five years, the sector saw some tail winds with sizeable investments in new mining and extensions of existing mining operations in which a significant number of the new mining operations are concentrated on industrial mineral mines, diamond mines (alluvial), coal, manganese, iron, gold, platinum group metals, chrome, copper, lithium, and other precious metals.

In this, the ministry is closely monitoring the implementation of R400 billion mining projects committed at various investment conferences between 2018 and 2023.

These projects cut across the mining value chain and are diversified in terms of geographical location and commodity, for instance:

  • Nkwe Platinum which committed R13 billion in 2021 for a new Platinum Mine has to date invested approximately R640 million towards the construction of the mine,
  • The Mokala Manganese Mine located in the town of Hotazel in the Northern Cape which began construction in 2019 with an investment of R1 billion, started producing in 2021 and to date 2.3 million tons of manganese have been produced and exported.
  • Menar, through its subsidiaries, committed to invest about R7 billion in coal and anthracite projects in Gauteng, Mpumalanga, and KwaZulu-Natal. Just over a week ago, the company broke ground and produced first coal at its new Gugulethu Mine.

In ensuring regulatory certainty in the country’s mining sector, the ministry has also procured a service provider for the design, implementation, and maintenance of a mining licensing system to enhance efficiency and transparency in the application, granting, and management of prospecting, and mining rights permits.

“We are optimistic that the PMG Consortium will deliver the required system that will assist in the operation of a modern and effective mining rights administration system,” said Mantashe.

Data migration

As per normal enterprise solutions, the implementation of the new licensing system will take place over a period of time, as it requires migration of existing data from the old to the new system.

To ensure that there is no disruption to operations, the minister said the exercise will be done systemically focusing on one province at a time.

“I have directed the Department to ensure that the migration to the new system is completed within 12 months to guarantee regulatory certainty.”

Licensing backlog

In dealing with the licensing backlog, Mantashe specified that significant progress has been made since the last Indaba event indicating that of the 2000 applications received since the beginning of the Financial year, the ministry has granted 268 prospecting rights, 32 mining rights, 85 renewals, 184 amendments and 190 permits.

“I have directed the Department to work with the necessary speed to wipe out the licensing backlog within this calendar year. It would be remiss of us not to acknowledge the challenges confronted by the industry as a result of these historical backlogs. We are, however, buoyed by the unwavering support and patience from the mining industry. Let me take this opportunity to assure you that we will get our business back in order and we will see an end to the backlog,” said the minister.

New mineral discoveries

Following the ministry’s partnership with the Industrial Development Corporation (IDC) which established the country’s exploration fund to aid in the exploration exercise, new mines have been born.

These include discovery of rare earth bearing minerals, such as lithium, coltan, and phosphate in a rock formation known as pegmatine in the Northern Cape, Kwa-Zulu Natal, Mpumalanga, and Limpopo.

The discoveries have brought to the fore the urgency and need for South Africa to finalise and put in place its own critical minerals strategy which we intend to launch this year.

“We are looking forward to see how we can further support the sector through regulations, funding and electricity supply.”

Electricity supply

In fact, the National Energy Regulator of South Africa (NERSA) has so far registered 1 312 generation facilities with a combined capacity of 6 387 MW, 32% of which supplies the mining load.

Already mining companies such as Gold Fields, Seriti, and Exxaro, have taken advantage of these reforms to power their mining operations.

Following the promulgation of the 2019 iteration of the Integrated Resource Plan (IRP), we have procured 6 094 MW of new generation capacity. Of these, 1 234 MW are under construction, and 150 MW are connected to the grid and supply the required electricity.

On the basis of this edition of the IRP 2019, NERSA’s concurrence to the ministerial determination for the procurement of 2 500 MW of nuclear capacity, and the subsequent gazetting of this determination, the procurement process of this capacity will begin in earnest.

In addition, the ministry has released requests for proposals for the procurement of 5000 MW of renewable energy under Bid Window 7 of the REIPPPP, 2000 MW of Gas-to-Power under Bid Window 1 of GIPPPP, and 615 MW under Bid Window 2 of the BESIPPPP.

 

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