Mpumalanga Business 2017 edition

OVERVIEW Mining The

OVERVIEW Mining The latest technology is improving platinum yields in Mpumalanga. Coal, platinum, gold and nickel are the province’s major mineral resources and all of these minerals are still in demand, even if coal and platinum have experienced roller-coaster price fluctuations in recent months. South Africa no longer enjoys world dominance in gold production – both China and the US produce more ounces – but it does produce 75% of the world’s platinum, 80% of its manganese, 73% of its chrome and 45% of its vanadium. Mpumalanga has significant resources of each of these minerals, and several others. The Witbank coal fields are the most productive in Africa and the province lies at the southern end of the eastern limb of the Bushveld Igneous Complex. Chromite, magnetite and vanadium are found in significant quantities in the province. The ferro-alloy industry is centred on the town of Middelburg. Deposits of chromite, magnetite and vanadium in this area are the basis of the ferro-alloy complex in Witbank-Middelburg (in the District Municipality of Nkangala) and Lydenburg (Mashishing). Nkomati Mine is South Africa’s only pure-nickel operation. The province’s coalfields are in the south and west of the province. Mining contributes 21.8% to provincial Gross Domestic Product (GDP) and the relative contribution of the province’s sector to mining in South Africa has risen in recent years, from 18% in 1995 to 21%. SECTOR INSIGHT A Mining and Metals Technology Park is to be developed in the Steve Tshwete Local Municipality. • Exxaro is developing a new coal mine at Belfast. • Anglo American aims to sell all its coal businesses. • Northam Platinum has purchased the Everest mine from Aquarius Platinum. A slump in world commodity prices has meant a decline in activity in most mining sectors, which in turn has led to a number of retrenchments. The provincial government believes MPUMALANGA BUSINESS 2017 42

OVERVIEW that more beneficiation would assist in creating employment. Although the province has a number of processing plants, a large percentage of minerals leave the province (and country) in their raw state, and consequently attract less value. In terms of new mining legislation, mining licences now include a provision whereby some of the resources mined must be made available to local manufacturers. The idea behind the Mineral and Petroleum Resources Development Act is to boost the minerals beneficiation sector, which, it is believed, will increase employment levels and stimulate economic growth. The first “pilot commodity value chain” has been developed by the National Department of Mineral Resources and applies to the iron and steel industry. Future value chain strategies will be developed for energy (coal, uranium), catalytic converters, jewellery and pigment production. The Mpumalanga provincial government has announced that it has plans to develop a Mining and Metals Technology Park in the Steve Tshwete Local Municipality. A coal beneficiation project in the eMalahleni district has been acquired by a local joint venture. Mining Weekly reports that Exxaro has disposed of the asset to Lurco Group and Burgh Group has acquired the asset from Exxaro and that the plan is to produce 25-million tons of coal for export and for domestic markets. Coal Mpumalanga accounts for 83% of South Africa’s coal production and is the third-largest coal exporting region in the world. The coalfields of the province feed a number of power stations situated nearby. The town of eMalahleni (Witbank), in Nkangala District Municipality, is at the centre of the coal industry. Eskom told South Africa’s parliament in 2013 that hundreds of millions of tons of coal are needed in the short and medium term to ensure stable electricity supply. Sixty percent of the utility’s supply comes from companies that have coal mines near to power stations (Exxaro, Anglo Coal and BHP Billiton) and these companies supply on a “cost plus” basis (in other words, the price Eskom must pay must reflect any additional costs that the miner has to bear). Short-term contracts are generally more expensive for Eskom, but these are growing in importance because the “cost plus” suppliers have not been able to hit their targets. In 2015, nearly 30% of Eskom’s coal (33.3-million tons) was supplied by Exxaro. The Exxaro group produces 39-million tons of coal annually. Exxaro is going ahead with plans to spend R3.8-billion on a new coal mine at Belfast. In 2015, engineering companies Arup and DRA signed contracts to deliver different aspects of the project, and SRK Consulting has been hired to build a railway siding. The mine will annually produce 2.2-million tons for export and 500 kilo-tons of power station coal. Although Anglo American announced in February 2016 that it planned to get out of the coal business altogether, the company still produced in 2015 a total of 50.3-million tons of it, with 17.4-million tons being exported at the end of 2015. Anglo’s sell-off will obviously re-shape the coal industry in Mpumalanga. It is not clear whether one buyer will take all or most of Anglo’s Mpumalanga’s assets, or whether the sale will be of a more piecemeal sort. Sibanye has already shown interest in many of Anglo’s assets (and has already acquired some of the platinum mines) so it might be a suitable suitor, and Exxaro has also indicated that it may be interested in buying some assets. However, anyone buying new coal mines will want to be sure that any contracts to supply coal to Eskom are water-tight. There may also be some interest in using the sell-off to bring more black-owned companies into the sector. State coal company AEMFC (African Exploration Mining & Finance Corporation) runs a colliery at Vlakfontein near Ogies and is planning to develop other projects. A plan to mine more coal for power stations near Kinross is under way and a smaller project in the eMalahleni area has also been assessed and will be developed once financing has been secured. 43 MPUMALANGA BUSINESS 2017