Every Friday morning, SAfm’s AMLive’s radio anchor Sakina Kamwendo speaks to Martin Creamer, publishing editor of Engineering News and Mining Weekly. Reported here is this Friday’s At the Coalface transcript:
Kamwendo: South Africa’s biggest gold-mining company is proving that deep can be cheap at its Mponeng mine on the Far West Rand.
Creamer: Yes, 65 km west of where we are sitting here, in the Golden City, is the world’s deepest mine. It is at 3 800 metres, approaching 4 000 metres and called Mponeng, owned by AngloGold Ashanti. One would think it would be coming to the end of its life, but not so.
They are defining new ways of mining at ultra-depth, I can call it. As it turns out deep can be cheap. We thought as you get deeper, it is going to get so expensive that you are going to have to do something else, but the grades down there are mouthwatering.
The gold ore gets richer down there. They have looked at the cash cost and the all-in sustaining cost looks like it is something like $750 an ounce, so that gives you a massive profit margin. The study is underway and they don't expect to have to spend a lot because they have already got massive infrastructure. Mponeng is already going, so you actually make money while you spend money. The 450 000 ounces that could come out of this a year from a billion dollar expenditure – billion dollars sounds like a lot of money – but it is going to be spent over ten years, so it is a level much lower a year.
This is also coming against the background of AngloGold Ashanti, for the first time, they have had a fatality-free first quarter. So, they are going hammer and tongs to be safe. If you can be safe at this depth using new technology it is going to be great for the country, because we need this gold mining activity to proceed. It has got to proceed at the proper cash cost. We see that from a point of view from Mponeng, the world’s deepest mine, this can happen.
Kamwendo: Palladium is overtaking platinum as the metal of choice to clean the air over the world’s biggest cities.
Creamer: This is terrible. Palladium is a north hemisphere-dominant metal. Platinum is a southern hemisphere metal, so the poor south is now being eclipsed by the rich north, because all of a sudden you find people moving towards palladium rather then platinum. You can see the gap between the two prices now is closing. One of the reasons is the Volkswagen scandal in the United States.
When VW cheated with the emissions, they created a sentiment against diesel and platinum is very much linked to diesel. A lot of diesel used in Europe and we used to benefit a lot from that. But, because of this scare and people’s sentiment turning against diesel and mayors of big cities saying they I don't want diesel, people are going back to petrol engines. If you do that, you then use palladium.
If you look at the bigger sales of cars in the world, they are in the US and in China and those are all petrol-dominant. It is putting palladium on top, which is again another reason why South Africa must look at its platinum industry. I know the competition laws prevent an industry from getting together and working, but there are exemptions that you can get if you go to the Competition Commission and say this industry is in precipitous decline.
We see that platinum is in a bad way, as an industry, let us get an exemption to sit down together without breaking the law and trying to work out something. At the same time there could be supply consideration and people are saying we are denialists when it comes to supply, we just keep supplying.
Therefore, what we are supplying into the world, we supply at a loss to us. We need to make sure that our national patrimony is not destroyed. The big thing is to go into the demand space. We have been looking at supply a lot, but if you cut supply there are job implications. What about looking heavily at demand? What about getting that platinum coin out? We have seen Mandela’s face on some of the samples.
Get the platinum coin out and what about using platinum as a reserve currency? Like we store gold in the Reserve Bank, what about platinum? Those things happen elsewhere in the world. It should happen here in South Africa as well.
Kamwendo: The Lonmin mine in Rustenburg is being coerced into creating 1 500 additional jobs for people who live nearby.
Creamer: That is right, the near-mine community are saying: “employ us”. The near-mine community has been benefitting. They now want 1 000 jobs for their members and they want 500 cadet positions for their unemployed youth.
They are going at it hammer and tongs to a point where there was a court interdict, which then slowed the actual violence down and the intimidation and damage to property. Then they went into discussion mode and they thought that they had solved the problem.
They had reached an agreement and people had signed, but the next day it got heavy again, with new demands. People coming forward and saying they want the 1 500 jobs. This is going to be very difficult for Lonmin, because they have just recently retrenched 6 000 people. They still employ 33 000 people, but they are people heavy at the moment. Particularly with the platinum price plunging.
We saw a plunge this month nearly $100 an ounce. It went from $980 down into $890. Fortunately it was announced this morning it has come up a little bit, but not enough. What Ben Magara, who is doing a dual job there, he is not only the CEO, but he is also the COO.
He hasn’t taken a personal increase since he was appointed in 2013, he refuses to take an increase, because there is so much challenge in the business. He is saying he is prepared to sit down and talk again, but at the moment, demands are unrealistic.
Kamwendo: Thanks very much. Martin Creamer is publishing editor of Engineering News and Mining Weekly.