Minerals Council SA and Mining Minister Gwede Mantashe might be headed for a clash if the latter resorts to implementing the “use it or lose it” principle he hinted at in his recent address at the council’s annual general meeting.
Addressing the media in the presence of the council’s president Mxolisi Mgojo and CEO Roger Baxter earlier in the week, Mantashe said the large number of mines under care and maintenance was one of the key factors identified for the recent reversed economic gains of the industry and government was considering implementing the use it or lose it principle.
“The high number of mines and shafts under care and maintenance contribute heavily to the massive decline in both production and employment. In this regard we will meet companies that are culprits of these practices. We intend to discuss honestly and robustly on the use it or lose it principle, found in our law.
“Our mineral wealth must be exploited, not left unused, if we are to generate economic growth and impact on the development of society. It is in this context that we wish to invite mining companies that are involved in this practice to come and make presentations to the mineral resources department on why this situation pertains,” he said, adding that should the status quo persist, economic deposits would be sterilised.
Mantashe said the recent statistics indicate that mining production increased by 3.1% year on year in February, showing a recovery from previous periods, but the growth was reversed by the 8.4% plunge in mining production in March as a result of a downturn of -18% in gold, -8.9% in iron ore and -6.1% in Platinum Group Metals.
Mantashe said in areas where there is care and maintenance there is also an increase in illegal mining activities, indicating a clear relation between the two.
He said the platinum industry in particular was going through a crisis similar to the gold sector in the late 1990s.
Mantashe took a swipe at the mining houses for “high grading”, a practice he said was when mines under fiscal strain mined only high-grade minerals and left marginal areas sterilised.
“Marginal areas can be sustained only if they are combined with high-grade areas and I suspect this care and maintenance is part of high grading,” he said.
Looking for certainty
Mantashe said government’s priorities in the mining industry are policy and regulatory certainty, which includes finalising the mining charter before the end of next month, improving health and safety, the complexities that cloud the granting of mining rights and bedevils the applications for mining licences, as well as combating illegal mining activities. He said he had already spoken to Police Minister Bheki Cele about establishing a special unit within the SA Police Service for this purpose.
The department’s spokesperson, Ayanda Shezi, said government would resort to the principle not only as a first resort, but rather to engage the companies placing shafts in care and maintenance to explore viable alternatives to ensure minerals are not sterilised.
Reacting to Mantashe’s statements, the council disagreed, saying that although Mantashe mentioned the issue of use it or lose it prior to the annual general meeting, it was not discussed in detail.
“The matter would need further discussion, we believe. In particular, it would be useful to understand the evidence that would support this premise. As always, the Minerals Council and its members remain open to engagement with the minister on how best to ensure South Africa’s mineral resources are accountable.
In general, however, the Minerals Council would advise that placing a mine on care and maintenance is not something a company would typically take very lightly. There are significant costs and legal obligations that are involved, without any income generation,” Charmane Russell, council spokesperson, said.
She said in the council’s experience, illegal mining in the gold sector took place at existing mines that had been mined out, as well as in closed or abandoned mines, which are under the management of the state.
“Where ‘pockets’ of mineable ore have been left behind at existing mines, this is because they are not economically viable – considering that companies have fixed costs in the way in which they operate – including paying for infrastructure, employment obligations, safety and health and environmental obligations, and all those costs associated with operating a mine legally and in compliance with the law.
“Another reason these ‘pockets’ might have been left behind is because it is not safe to mine them. You will be aware that best practice mine planning provides for pillars to be left behind for stability and, ultimately, safety,” she said.
She pointed out that in the chrome and diamond sectors there had been illegal mining when existing rights and permits had simply been overlooked and areas invaded.
“Generally, it has not been our experience that members whose operations are on care and maintenance have been afflicted by illegal mining. The Minerals Council will engage further on the matter with the minister at his convenience,” she said.
At the meeting AngloGold Ashanti chief operations officer Chris Sheppard confirmed the company would be shedding 2 000 jobs in line with its restructuring plans.
“AngloGold Ashanti has reduced its production in South Africa by about 50% through the sale of the Kopanang and Moab Khotsong mines in February and the closure of the TauTona mine announced late last year.
“The company’s remaining South African assets now include the Mponeng underground gold mine, and a surface operation, both of which have the potential for long lives.
“The all-in cost of the South African business in the first quarter of this year was $1 361/oz, compared with a gold price of only $1 330/oz in that period.”
The decision did not go down well with the National Union of Mineworkers (NUM), which lambasted the company for prioritising profits.
“It has become a fashionable trend for this company to retrench mineworkers,” NUM spokesperson Livhuwani Mammburu said. The company had announced job cuts totalling 11 349 since last year. It announced 8 500 last June and 849 a few months before that.
Sibanye Stillwater, which also announced last August it would shed thousands of jobs and had four shafts under care and maintenance, would not comment on Mantashe’s address.
Sibanye spokesperson James Wellsted said he could not comment on the consideration of implementing the use it or lose it principle because there were not enough details on the matter.
The latest Stats SA report showed the mining industry had 50 000 fewer jobs now than a year ago. It now employs 397 000 people.