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Feb 24, 2012

24/02/2012 (On-The-Air)

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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: The government is trying a new way of incentivising South Africa’s struggling junior mining sector.

Creamer: The Finance Minister Pravin Gordhan in his Budget has really tried to keep this on the radar screen. The Treasury has been looking at some ways of incentivising junior mining since 2006. They first looked at the Canadian flow-through scheme, which is a fantastic scheme.

If you go to Canada and you look at those massive under-pins and buildings of Toronto, you realise that they are all there because of the mining sector.

The mining sector grows, because of the way they incentivise the junior mining. This is called a flow-through scheme, which means that the expenses that are created from exploration, flow through to the investor and the investor is able to get a tax-break on this.

In other words, the investor is able to subtract this from his taxable income and at the same time he holds on to the share. It has worked tremendously, but the Treasury in South Africa, in its wisdom in 2009, said that they will introduce something better then the Canadian flow-through scheme and they Gazetted venture capital ideas on July 1, 2009 and it just went down like a lead-balloon.

Not one person has actually availed themselves with this venture opportunity. Fortunately, Pravin Gordhan has kept this on the radar and I think that is necessary. Ultimately, I really think that most people believe that they will have to go towards the Canadian flow-through scheme.

They are not doing that in this Budget at the moment even though there is an urgent need for exploration and a lot of juniors crying out saying that they are not going to do anything for the next three years, because there is just no ways they can get capital from banks. This is the issue, the banks just don't fund these things and we know that we need to explore. It is like the research and development of mining.

So does Susan Shabangu, the Minister of Mineral Resources, she is trying to promote exploration heavily, but I think we definitely need something like the Canadian flow-through scheme. Treasury in South Africa says that it is an admin nightmare, but I think maybe the admin will be worth doing.

Gwala: South Africa’s once thriving platinum business is suddenly being badly hit on many fronts.

Creamer: It is being hit by strikes, politics in Zimbabwe which is quite serious because there is new ground rents coming through there. It also hit by the safety stoppages in South Africa.

This is having a very serious effect on the industry. We know that when supply is threatened, as is happening now, because we’ve got our second biggest platinum producer, Implats, having a prolonged strike. It is not a normal strike, it is very different aspects to this. We have also got analysts crying out against Amplats, which is Anglo American Platinum, and the CEO is having to do a review of the whole business.

Then those active in Zimbabwe are facing massive increase in what they call ground rents, like millions of rands being charged. Implats faces a bill of about $48,5-million whereas up to now they have only been paying $45 000 a year. It is a massive injection of new vigour in terms of ground rents. What happens is that supply becomes constraint.

Already you see the signals of people being concerned about a shock. Now if there is a shock you get a spike in the price and the problem with getting a spike in the price is that scientists then start looking for alternatives. We know how valuable platinum is and we know that is has got a fantastic horizon.

This is the metal that will play a part in driving our cars of the future and be part of the whole hydrogen economy and even generating electricity for us in that carbon free way. If it is not supplied, people look for alternatives and we know they find alternatives.

It will be terribly sad if this whole industry gets mortally wounded. At the moment it is badly wounded and we see that it is not coming to an end in Rustenburg with unrest and even if it does there will be weeks to go. Perhaps the lesson there that, as in business, you have union monopolies. Perhaps in union activities you cant give monopolies either, because it is a closed-shop for the National Union of Mineworkers there.

That hasn't done them any good and now we have a new emerging union, the Association of Mineworkers and Construction Union, AMCU, coming at the industry in wildcat form, which is not doing anybody any good.

Gwala: South Africa has managed to beat off the UK and Australia for the right to host an important technical conference and exhibition.

Creamer: As we hear all the time from economists South Africans are actually exporting skills at the moment. The Australians and Canadians are talking a lot of our skills and this is a very sad situation.

It is very encouraging to see that there are some technology heroes in South Africa, who fight to keep these skills in South Africa and who themselves remain in South Africa to develop skills. In this issue of non-destructive testing, it is a small technology, but a very important technology, this is a safety critical technology.

It is what enables you to look into plant and equipment and see where the faults are and if there are any safety issues and see whether you can continue this for a long time, which saves a lot of capital.

It is vital and it so great that these people within the non-destructive industry have arranged for the World Conference on Non-Destructive testing to be held in Durban. They fought off all opposition from the UK and Australia.

They are going to have hundreds of people coming into South Africa from all around the world. The Indian delegation alone is 150 people, the Chinese are probably going to be of an equal number, South Korea coming in with 50 to 60 people. This is all to showcase the state-of-the-art of non-destructive testing, which is so important.

It is an opportunity for South African engineers to earn their continuous professional development points, which they have to earn on a yearly basis in order to remain with the status of being engineers. Engineers can earn these points by attending this conference, which goes from April 14 to April 20 in Durban.

Gwala: Thanks very much. Martin Creamer is publishing editor of Engineering News and Mining Weekly, he’ll be back with us at the same time next week.

Edited by: Creamer Media Reporter
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