On-The-Air (21/08/2015)

21st August 2015

By: Martin Creamer

Creamer Media Editor

  

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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 once mighty gold mining companies are preparing for worst-case scenarios.

Creamer: I hope its not like Custer’s last stand, because we know what happened there. The talk in the mining industry this week was about worst-case scenarios. The one that come out more forthrightly then any was Africa’s biggest mining company AngloGold Ashanti, where it mentioned harvesting. When you harvest in mining it means you making that last stand. It means that you are not going to invest anymore in their mines because of the poor conditions.

He is saying that if the gold price goes below $1 000 an ounce, not ruling out that it will do, he is saying that he will with certain mines harvest, meaning they won’t spend another cent on them. You know to keep mining you have got to create access further down the line. You use the money that you get from the existing access to create further access. He is saying that they will stop creating access and just mine out and extract every last bit of precious metal there. When that ends, they will then close the mine until the crisis ends. Now, we think well this is not happening, already we see AngloGold starting to do this in Mali.

It is saying that if things worsen it will do so with other mines. This is an interesting point in the history of AngloGold Ashanti, because we know that in the past the bulk of its earnings used to come from South Africa. That is now totally reversed and if you look at the last three months to June 30, 84% of its earnings came from outside of South Africa. It came from Brazil, Argentina, Australia and from elsewhere in Africa.

What is that saying? Elsewhere in Africa they report that despite the fall in the gold price and the rest of the world, their profit margin has risen. They are doing better and they think they will do even better there because they are making new strides. In South Africa production, and production is a thing you should be able to control, 18% down. Now, why does that happen? They raised the issue of safety stoppages. The government causes these safety stoppages. They are brought about by the Department of Mineral Resources.

He is saying that you can have an approach to safety stoppages that is less drastic then what we have got. He gave an example of a freeway, if there is an accident on the freeway and you close the whole freeway, you cause serious disruption and you don’t even say when you are going to reopen it. That is what is happening with safety stoppages in mining. Instead of ring fencing the accident area and carrying on, they close as it were the whole mine for an indefinite period.

This creates situations where at a time when South Africa is desperately needing to export gold and earn foreign exchange, our rand is under pressure, we have self inflicted wounds where we actually do very badly in this country. That is what was clear from the three months that AngloGold reported on this week. They are also saying that we now are having 84% coming through from outside. We can resist disruption here if there is going to be a stoppage.

They are referring to what happened to platinum, if there is going to be a serious problem we can actually withstand it for some time because South Africa is no longer that important to us. A lot of our shareholders are saying we should get out of South Africa and ring fence South Africa and create AngloGold Ashanti outside the country. That did not work because the Reserve Bank cut off a few avenues there, but still the thinking is harsh.

Kamwendo: A major effort is being made to get cargo off the roads and back on to rail using a new app.

Creamer: We have been trying for a long time as South Africa and Transnet to get cargo back onto rail. It is cheaper to put it on rail, safer to put it on rail and less polluting to put it on rail. It is a better deal for most as you can have an intermodal situation where the trucks can take over once you reach a station. But for the long-haul rail is best.

We can’t pursaude South Africa to get back to rail and it is actually costing a lot because it ruins the road. In the meantime perhaps the whole climate change issue might acutely make us aware of some of the benefits of going on rail and that is why Transnet has brought out this carbon calculator app. They have got an app which can calculate the amount of CO2 you are putting into the air by going on road instead of on rail. If the carbon tax is introduced next year, and many people are hoping it doesn't get introduced because it could be the last straw that breaks the camels back, but if it is people will be measuring that carbon footprint.

Transnet has introduced this app where corporations will be able to use this app to know how much they are putting into the atmosphere, how much they are likely to be charged, R120 per metric ton of CO2 and how much they could save by going on rail. Perhaps this might lure people back onto using rail and get to that win-win situation where we have an intermodal situation where rail does the hard yards and trucks can take over once it gets to the shorter destinations.

Kamwendo: The full weight of legislation is being thrown behind South Africa’s new search for oil and gas.

Creamer: Your country does not end at the beaches, your country does not end at the coastline, your country extends 200 km out. The penny is dropping, this is our country, it goes 200 km out, let’s manage that area and let’s turn some of it to account where we can, but it costs an arm and a leg. Now we know that in the past when BHP Billiton was managed by an American CEO he wanted to do a lot of drilling in South Africa.

He said he would bring rigs from elsewhere and start drilling offshore in South Africa, because he was keen to do a lot in South Africa. BHP Billiton at that stage was quire active in South Africa and it took ages for Treasury to tell him what the terms where going to be, which means we lost out. He was going to do a lot of deep sea drilling, which costs you a fortune, it would have been so beneficial now. It shows you that the legislative framework, the regulatory doors have to be open. We are now hearing good sounds that legislatively they are going to encourage this investment.

Even onshore we need that, because if you look onshore at the moment there is no exploration, there is no greenfields exploration and that is the life blood of your minerals and metals development. You can say that there is going to be a huge lag now. The best we can get is near mine exploration. Even now the mines are just cutting back and they are not doing that anymore. Other countries have got Internet systems where you can go onto the Internet and see what is available. You can sit in New York and see all the geophysical tables and what you can do, where you could possibly get rights.

We have not got that yet, small countries in Africa give you that situation. Instead our geoscientists are going outside of South Africa and doing work in Africa. They are State-employed people but they are doing work outside of the country instead of here. I think we need to bring them back and get some good geophysical data and actually sell this exploration story which is going to be our life-blood going forward.

Kamwendo: 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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