Industries Chief Executives stated that the traditional deep-level mines in South Africa that absorbs thousands of jobs are no longer a viable option in platinum and gold.
At the Joburg Indaba mining conference, Impala Platinum CEO, Nico Muller said the move to shallower, less labor intensive, safer and more cost efficient mines means there is unlikely to be investment in new shafts going kilometres deep into the earth after the company has completed its two new deep level mines in the next few years.
Muller noted that in the future, Impala Platinum would not invest in more shafts that are 2 km deep or more costing up to about 20 billion rand over a decade. He said the benefits of opencast mechanised mines simply overshadow deep level platinum mines when it comes to safety and the forecast of cost escalation, particularly for labor, which rises above inflation.
Peter Steenkamp, Harmony Gold CEO also noted that the future of gold mining in South Africa was not looking good. South Africa produced the largest source of gold in the world for decades, but has since fallen to eighth place, as the country’s mines have grown older and deeper.
Steenkamp notes that due to lower productivity and runaway input costs, the expectation is that in a decade from now there will just be five gold ore bodies left in South Africa to be mined. He said “in SA’s gold mining, there are projects to do to extend the life of mines…but the reality is that gold mining is at the end”.
Impala Platinum and Lonmin, two of the biggest platinum producers in the world, are running out of cash after a decade of stagnant platinum prices and profit margins eroded by rising costs of electricity, labour and water.
Anglo American Platinum CEO, Chris Griffith believes that the right kind of investment will deliver the right kind of returns, especially in a market where the price of basket of platinum group metals the company produces has risen by 20 percent so far in 2018 and by 17% in rand terms.
Griffith revealed that returns on shallow, mechanised projects are much shorter than the seven to ten years expected on deep shafts. He said “we’ve got the projects to get really good returns. Luckily, they’re not big deep vertical shafts”.
Lonmin CEO, Ben Magara, noted that it was imperative to encourage the consolidation of the platinum sector where large chunks of the industry are unprofitable and need to be incorporated in entities that could make money.