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On-The-Air (14/11/2014)

On-The-Air (14/11/2014)

14th November 2014

By: Martin Creamer

Creamer Media Editor

  

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AMLive anchor Sakina Kamwendo on Friday presented another Update From The Coalface with Martin Creamer, publishing editor of Engineering News and Mining Weekly.

Kamwendo: An Indian company is taking the unprecedented step of investing R8-billion in South African zinc mining.

Creamer: That is Vedanta, it’s listed on the London Stock Exchange and interestingly it’s led by an American, Tom Albanese. He’s well known in these parts. He led Rio Tinto before and what he’s doing now is leding an Indian investment, more than R8-billion into mining and refining in the Southern African area of zinc, which really, South Africans have turned their back on zinc. You know, Anglo sold out to Vedanta. We also have Exxaro, which have said, “it’s not our strategy to be in zinc”, and that is a black owned company.  They closed their Zincor refinery in Gauteng, and they also sold off their zinc assets in Namibia, but they are still the Black Economic Empowerment partner to the Indian company Vedanta at Black Mountain, so they will have to contribute, in fact, if they stay into this investment, which is a very interesting investment. A lot of people have moved away from zinc, because the zinc price was on the canvas, but it’s lifting itself off now, we see the price returning.  The Indians know this industry very well, they also bought Irish interests from Anglo, which  are now depleting, so they see this as a very important long-term investment in this very important metal which helps with galvanizing, which often has a price problem. With this investment, Southern Africa will hold itself as one of the most important hubs of zinc in the world. 

Kamwendo: Concern is intensifying about Eskom spending R10-billion a year on diesel for peak electricity.

Creamer: There are always unintended consequences, we have to have checks and balances with electricity capacity, because you can’t just suddenly use up all the capacity, so, what they have is OCGT plants, which are Open-Cycle Gas Turbine plants, now, don’t worry about the word gas in it, because they don’t use gas, they use diesel and they are in places like Cape Town where if there is a problem with peak power, they click in to give that emergency power or if there is load shedding, they do a unintended consequence and they  keep going for too long. Now we’ve found that they’ve used up R10.5-billion worth of diesel last year, which has lifted people’s eyebrows, and they’ve said, “look, this is unsustainable”.  We should go to gas, because it’s a no-brainer even if you built liquefied natural gas import terminals, they would pay for themselves in no time next to that sort of expenditure and you know, the company Shell, which is proposing this is also a supplier of diesel, it benefits on both sides, but it’s saying, “look, go for gas.”, we know the people are drilling offshore in Cape Town  as well, so there will be this gas coming through, and gas is about a fifth of the price of nuclear, it’s a half of the price of coal, so it is the way to go in that area.  We know that Shell is also looking for shale-gas in Karoo we know that PetroSA was looking to build a natural liquefied gas operation in Mossel Bay, but the seas are too choppy there. So, finally now we hear from Shell that they are looking for sites in Saldanha Bay and also Coega and Richards Bay for a possible liquefied natural gas import terminal, which will solve some of these diesel cost problems.

Kamwendo: The Chinese are snapping up some of South Africa’s hardest-hit gold and platinum mines.

Creamer: When the going gets tough, the people with the cash come buying.  They look for bargains, and we saw with the platinum company Eastplats, the Crocodile River operation, that was snapped up by the Chinese for $225-million, we saw those shares rise in Canada of Eastplats, Eastplats also listed in Johannesburg, but was noticeable in Canada, they rocketed by 147% after this purchase.  Now this week, we see the Chinese coming in and offering Central Rand Gold, which mines gold under Joburg, close to where we are sitting here. They’ve offered them  $150-million, saying should we sell? They’re looking at eachother and Wesizwe Platinum already owned by the Chinese and the Chinese put a massive $650-million into it two years ago.  Orkney Gold Mine, owned by the Chinese, also, the Chinese have put R600-million into that and even outside of the precious metals space, Coal of Africa, that is being underpinned now by Chinese equity capital. Palabora Copper, the Rio Tinto share of that being bought out by the Chinese  and the same Chinese company looking to possibly have a steel operation  there and this Coal of Africa will send in this hard-coking coal from South Africa into that.  We also hear from Aquarius Platinum that they’ve also cut off their deal with China, so all over the place, China looking for bargains.   

Martin Creamer is publishing editor of Engineering News and Mining Weekly. He’ll be back At The Coalface at the same time next Friday.

Edited by Creamer Media Reporter

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