Every Friday, SAfm’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: Yet another huge mine is in serious financial trouble, which is throwing up the dread of more mass retrenchment.
Creamer: This is a huge disappoint. We are in the province of Gauteng, which means place of gold. We had this great hope, because South Deep was a mine that would continue for another 50 to 100 years. This was the biggest mine in South Africa in terms of gold discovery and one of the biggest in the world still standing.
So, we always thought that when all the other mines closed, we would still have South Deep, right in Gauteng, close to the City of Gold, where everything began. Now, our hopes have been dashed. Not only did we say that this is a different mine, we wouldn't be crawling on our bellies in an area that is not even as high as the table that I am sitting next to, which is the normal low-reef activity that we use to try and get gold out of the ground.
This is huge, you can drive a double decker bus into the void and you will still have room for a roof rack. We thought people are going to be in a different earnings base. We saw the machines coming in there. We spoke to the machine operators and they were talking very big numbers in terms of earning potential. I mean, that R12 500 that we hear in the platinum that caused the massacre at Marikana, they are way above that, but they are not producing profitably.
People have invested, and that is Gold Fields shareholders, have invested R32-billion into this mine and they haven’t got a cent out of it yet. We are talking about the investment beginning in 2006. So, it is a very big disappointment. What is happening now, is that they want to again try a new formula, because they are working in a mechanised environment, 3 km below the ground. No one else does that, so it is unique. They brought in people from Australia and Canada, but there is nothing in the world like this.
They are spending a fortune on training, but they are getting zero return. They are actually losing at a rate of more than R1-billion a year at the moment. They say the bleeding is just too much, so they have got to stop and rethink, which means that another 1 500 jobs are on the line.
Kamwendo: South Africa should adopt the growth model that has proved so resoundingly successful for the economy of Canada.
Creamer: When it comes to metals and minerals in the ground, South Africa is way ahead of Canada, but then Canada is so far ahead of us in terms of extracting those minerals and getting a spin-off into the economy.
When you go to Toronto and you see those tall buildings, that is all mining funded. They have gone about it sensibly. Half of the money that goes to mining investment, goes through Toronto now. We are sitting in a city that is built on mining, Joburg. Toronto is also built on mining. We have got $2,5-trillion worth of value in the ground, they have got nothing like that. We are the best endowed in the world, yet we do not have mining activity and all that value in the ground is worth zero unless you can get it out.
So, why not adopt this Canadian model? It has been so successful, yet, South Africans look at it and say we have got a much better approach, but we are not anywhere near Canada when it comes to using mining to boost the whole economy. Even in the safety of mines, the Ontario mines are probably deeper than many in the world, but nothing like the depth of our mines, yet people all over the world talk about the Ontario safety benchmark.
That is where they started, making people safe then they brought in all the incentives that persuade people to invest in mining. We know the model, but we refuse to follow it. The Canadian model brings in so much activity across the economic board, it improves manufacturing, engineering, banking, education, legal services, transportation, construction, environmental management and so many side linkages.
There are massive spin-offs from mining and it is just what our economy needs at the moment, but for some reason our egos stop us from taking this model and putting it into the action and getting our economy moving.
Kamwendo: The Constitutional Court should be called upon to lift the veil of secrecy off the large number of mining exploration licences being kept under wraps.
Creamer: It is terrible that these mining exploration licences are kept under wraps. It has been an issue for decades now. You cannot do business if don’t know what is happening in your environment. There must be a lot of communication and a lot of information.
It happens in other mining jurisdictions, people know who have got the mining exploration licences, what they are doing, whether they want to sell these, whether there is an opportunity to go in. We don’t know anything. When you try and get something out of the Department of Mineral Resources (DMR), you don’t get it.
They say DMR policy is that you must go to the people who have been awarded the exploration licence and ask them if they are prepared to reveal that so that you can publish something in the newspaper. We don’t where to go, because we don’t know who the awards have been made to. Unless you know where all these exploration licences are, you’re not going to attract investment, not even local investment.
We see that they have come with this Section 12J of Income Tax Act trying to incentivise exploration, but it is not incentivising exploration, because you don’t have enough information. That 12J is being used for everything other than mining and it was meant for mining. The people who are using it for mining, that incentive is being used for existing mines, within the mine fence and not for new mining development.
So, how do we grow here if we don’t have the information? I think the only way to do it is to get the Constitutional Court to come forward, or someone to go through the Constitutional Court and say it is our right to know who has been awarded these exploration licences. Surely, simpler is for the DMR to publish this information.
Kamwendo: Thanks very much. Martin Creamer is publishing editor of Engineering News and Mining Weekly.