Every Friday morning, SAfm’s AMLive’s radio anchor Xolani Gwala speaks to Martin Creamer, publishing editor of Engineering News and Mining Weekly. Reported here is this Friday’s At the Coalface transcript:
Gwala: In the midst of South Africa’s worst labour unrest since the Eighties, Gold Fields has clinched a momentous R173-million deal with NUM that could redefine South African gold mining.
Creamer: We are talking about South Deep. All eyes have been on KDC, where management and worker are just staring each other down. Workers not budging, moving out of the hostels, sitting on a hillock saying we want that amount. Management saying, look we will only deal with it in 2013.
A different story west of here, closer to here, at South Deep now a different mine. South Deep, which is owned by Gold Fields, is 100% mechanised. This is a mechanised mine where you can get the productivity and deal with demands.
The deal they have cracked there is one that South African mining has been searching for, the Holy Grail, what is called full calendar operations, Fulco, they have managed to clinch that. It is going to cost them R173-million in advance for all their deals and systems they’ve had, the bonus systems, but they find it worth it because coming up from South Deep in 2015 is going to be a steady state 700 000 ounces of gold a year, going to 2065 and beyond.
So, when all the other gold mines here have turned their lights off, South Deep will still be going. This is why they are able to do such a good deal. When you walk into South Deep, it is a different mine. It is not one of those narrow vein ore-bodies where people have to crouch.
There ore-bodies are so deep they are taller than the ceilings here, you can get a double decker bus in with a roof rack, that is how big South Deep is. It lends itself to mechanised mining with these big drill rig operators. When I was in that mine in 2010, I said to one of the drill rig operators: ‘what pay do you take home’, and he said to me R50 000 a month.
He was an exceptional guy, working very hard. What they have introduced now is this Fulco, its called four by four. It means you work four days on, four days off, 12 hourly shifts. They have introduced a mid-shift break where they will supply the food and drink and they have also got food and drink at the start of the shifts to make sure that there is no fatigue. It will mean that for the first time in South Africa, we will have this full calendar operation, which you need in mining.
This is the global activity this is how it works everywhere else in the world. We haven’t been able to clinch it, but they have done it here. So it will be five more working hours a day, seven more production days a year and 50 fewer working days a year for workers.
So, it is a win-win situation. There will also be 400 additional jobs coming out of this, and with much higher pay.
Gwala: A group of South Africans have stumbled on a new technology that can turn the tiniest copper deposit into a fountain of cash.
Creamer: Copper is often stranded. You need a big copper resource and the price is good. We just had a report yesterday that even next year there is going to be a copper deficit and the price is likely to be, the prediction is $8 500 per ton, so it is a good space to be in.
Along come South African entrepreneurs, the second time this same group has cracked the code. They have done it at the magnetite dump at Palabora Mining where they are going to get metallic iron out of that and sell it at a very good price. Now they’ve gone into the Northern Cape.
There has been a great history of copper mining in the Northern Cape, around the Springbok area and Okiep and Nababiep. These are not operating because copper requires a lot of energy. We haven’t got the electricity in South Africa.
You need a big resource for electrowinning. So all these small pockets are just lying around there and along came these guys and said they can turn it into cash. They have cracked the code and it was such an interesting story, because the person who’s done it, Dr Gerard Pretorius, tells you he is always fiddling with metals beneficiation.
So he does things at home where he was bringing in malachite, which is copper bearing from the Democratic Republic of Congo and he was able to get rid of a lot of it because it was jewellery grade, but there was a lot leftover.
He was wondering what he was going to do with this and he wanted to get the copper out. He thought that South Africa doesn’t have electricity in abundance so he must go a different route. So he went the hydrometallurgical route. He used to over stir this thinking that this is the way he could create copper crystals.
He had set-up his laboratory one Sunday and was about to start his stirring when his wife said, hey, we’ve got to get to church, so they rushed out to church. When he got back, he realised that his magic ingredients had worked. Before his eyes where these beautiful copper crystals.
I witnessed it this week. I witnessed the desktop laboratory experiment and the demonstration plant that they’ve got where they grow these copper crystals on scrap metal. More then 98% pure, so they are now spending R24-million initially, because they want to show the world that this can be done commercially.
They have gone into Spectakel, near Springbok, in the Northern Cape. Putting up their plant and their first copper will be produced in the first quarter of next year. This R24-million will be paid off in less than a year, that is how the copper price is going.
They are already working on the second plant, also in the Northern Cape, at Concordia. The Department of Mineral Resources in Springbok is over the moon about this because that area has been economically ravaged. Now, from the smallest of deposits, you can now create cash-flow.
Gwala: Detailed data over the last 60 years proves that the South African government has benefited far more from gold mining than the shareholders who have risked their money.
Creamer: We often think, with nationalisation coming up, that the State has been ripped off here, we must grab these mines. That is the story that we hear, but if you look at the hard data for gold mining from 1951 to 2011, if you take the gold-mining industry as a single entity, the State has level pegged with direct taxes on what the investors have got in dividends.
Exactly the same, but if you go beyond that and look at what the State has got in terms of the jobs that have been created, the backward and forward linkages, the State has creamed it. We are even sitting in an environment here in Johannesburg that was created on gold.
Those are the backward and forward spinoffs that you get, but if you just take direct taxation, it is equal to direct dividends, over a 60-year period. It shows you that this gold tax formula that we have, that was introduced in 1936, and some mines can opt for the flat line corporate tax, they had an option in the late nineties to either go with the flat line tax, or go with the gold tax formula.
If you stick with the gold tax formula, it is really tailor made for the mining industry. When things are starting, you haven’t got a very big tax burden, it’s a progressive tax, but when you are really making money and you go into the windfall area, the State can get like 50% more then it would.
All these calls for super tax etc are built into this thing that has been going on since 1936, which has stood the test of time. Another big thing about this tax is that it favours, marginal mines, in other words people don’t just go in and in their first year and do what we call high-grading, that is, take out all the good stuff and leave all the low-grade stuff, which is very bad for a country.
This tax fits that bill, it allows them and take a long-term view and take the good and the bad and make sure the government also gets its cut.
Gwala: Thanks very much. Martin Creamer is publishing editor of Engineering News and Mining Weekly, he’ll be back with us at the Coalface at the same time next week.
Edited by: Creamer Media Reporter
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