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On-The-Air (21/06/2024)

Martin Creamer discusses investment stories and clean, green electricity.

21st June 2024

By: Martin Creamer

Creamer Media Editor

     

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Every Friday, SAfm’s radio anchor Sakina Kamwendo speaks to Martin Creamer, publishing editor of Engineering News & Mining Weekly. Reported here is this Friday’s At the Coalface transcript:

Kamwendo: Australians were told this week that South Africa is now one of the world’s most compelling investment stories.

Creamer: It is amazing how the investment sentiment has swung so quickly in South Africa’s favour. Orion Minerals, which is listed in Sydney, had an online webinar and during that webinar the Orion CEO Errol Smart quoted analysts as saying South Africa is now one of the most compelling investment stories in the world. This sentiment is being enhanced by the strengthening rand, because when you building something like a mine, which Orion is doing in the Eastern Cape, when the rand strengthens and you are required to import goods, as is invariably the case with developing mines, the cost structure for what is being developed begins to fall because the imports become lower in cost.

So, the Orion Minerals CEO was absolutely over the moon when looking forward. When import goods and services, those goods and services are now set to be cheaper than what was budgeted and that is among the factors that is causing the investment sentiment to rise, to such an extent that an international investment management company such as JP Morgan has put South African in a new elevated investment category. In addition, another investment managing company, Anchor Capital also saying this is the time to look at South Africa, at least in the short term. So, it is actually an amazing turn of events on the investment front in favour of South Africa.

Kamwendo: Nearly R4-billion is earmarked for investment by one of South Africa’s major mining groups.

Creamer: Thungela Resources, which is listed on our Johannesburg Stock Exchange, said this week that it is in the process of investing nearly R4-billion of capital expenditure into its projects in South Africa. Again, people looking to build with the help of imported goods and services are seeing the strengthening rand outlook as being very positive.

While the execution of the plan go forward with these projects has been under way for some time, all of a sudden, when you look at the rand, the goods and services that still have to be imported adopt a gladdening lower-cost hue. It is in South Africa’s Mpumalanga province where the Johannesburg Stock Exchange-listed Thungela has two mining shaft projects, both are expansionary projects, and they are now going ahead in a much more favourable local currency environment. Expansionary capital expenditure or capex is always better than stay-in-business capex and the nigh-R4-billion being invested by Thungela is largely expansionary capex.

Capex is being spent immediately and in Thungela’s current financial year, more than R2-billion of it will be in the investment phase. Then, as these projects proceed, Thungela has budgeted for more expenditure, and in total this comes close to hitting the R4-billion mark in the relatively near term.

Kamwendo: Richards Bay Minerals is moving to clean, green electricity at a record pace.

Creamer: It is amazing how quickly mining companies are now organising their own electricity generation in the form of renewable energy, that is power from the sun and the wind. The latest wind power agreement of Richards Bay Minerals, involving 140 megawatts of wheeled power from the Western Cape, was concluded in six months, which could well be a record.

The executives involved have done many projects, but never at such a fast pace. You can see that the whole attitude towards renewable energy is getting into a stronger market mode, which is reflected by what has been achieved by Richards Bay Minerals. This KwaZulu-Natal mining company is now looking to going into also having renewable power on site, in addition to their wheeled solar and wind power electricity arrangements already concluded. They are also looking to have energy storage on site as well. In addition, power aggregation is being eyed. Innovative power aggregators are making themselves more visible. Now, we call them aggregators, but they are licenced as traders, although they don't sell over the counter.

They are going to be buying in power from many independent power producers and having a platform from which companies needing renewable energy can get it very quickly and even for relatively short periods of supply. The supply contracts of aggregators will likely be very pliable and include short-term, medium-term or long-term arrangements compared with the current arrangements, which are overwhelmingly longer term. So, all sorts of interesting developments taking place on the renewable energy front in South Africa, where investment sentiment has turned very positive.

Kamwendo: Thanks very much. Martin Creamer is publishing editor of Engineering News & Mining Weekly.

Edited by Creamer Media Reporter

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