The challenges facing the local mining industry this year are comparable to those facing the global mining industry, PwC Southern Africa CEO Dion Shango said on the first day of the Joburg Indaba, on Wednesday.
He said said there is a strong correlation between the market capitalisation of companies and commodity prices, among the top 40 global mining companies.
“Sometimes investors’ view of the mining industry can be emotional, based on the spot price at any time.”
The JSE mining index has underperformed, compared with the HSBC global mining index, over the last five-year measurement cycle, owing to the basket of commodities in South Africa being more weighted towards precious metals, which has been underperforming.
However, Shango said the JSE outperformed the global index over the last six months, perhaps owing to the “Ramaphoria” effect and the stronger rand that prevailed for a few months.
“Globally, and in South Africa, the mining industry carries many risks. It is widely acknowledged that macroeconomics and geopolitical regulatory risks are among the highest risk factors.
“For South Africa specifically, there is also risk regarding labour relations and skills development, since the country is especially focused and considerate of these elements, as well as operational costs increasing,” he explained.
Shango added that there are risks in the global context that are not necessarily an issue in the South African mining industry, including natural disasters (however, many deep-level mines operate in an environment with high seismic activity levels), technology and cyberrisks, and market competition is ranked higher overseas than for South African mining companies.
Opencast and coal mining safety statistics are, however, on par with global counterparts, in terms of safety in the mining industry.