by Ina King (Potgieter) May 14, 2020
Following South Africa’s introduction of a 5-Level lockdown system and the country’s progression to Level 4, mining industry regulations are easing.
The industry was dealt a severe knock during the lockdown period, with leading mining companies such as Impala Platinum having reported loses of 6% milled tonnage at mines Impala, Two Rivers and Marula.
Yet, amidst the economic wreckage wrought by the virus, there are some positive signs for the country’s mining industry, as the ramp up of production continues.
Concerned about the possibility of multiple mine closures, and inactive mines becoming potential safety risks, the South African government had already permitted all mines to operate at 50% capacity as of April 16. And by 1 May, open cast mines have been able to operate at 100% capacity, while underground mines remained at 50%.
“Neglecting a mine for a long time, or leaving a mine inactive, poses the danger of rockfalls and increased seismicity,” explained Nkosazana Dlamini-Zuma, minister of Cooperative Governance and Traditional Affairs.
Expecting a total production capacity loss of 15% for the financial year, due to the lockdown extension, many mines could face financial quagmire. Warnings from Minerals Council South Africa indicated that some mines could even expect closure.
Yet, on the flip side, work on the mine poses inherent challenges to social distancing, where keeping 1.5 – 2m space from another miner, especially whilst underground, is near impossible.
As the mining sector forms a considerable swath of South Africa’s economic backbone, reopening the industry and limiting the damage caused by shutdown is paramount to getting the economy moving once again. Yet is must be tempered with utmost considerations for human safety and other knock-on socio-economic effects in a balancing act that has little margin for error.
The case of the Dwarsrivier chrome mine suspension indicates the challenges of mining operations amidst the pandemic. Operations at the chrome mine, which mined 1.55 million tonnes of chrome ore in the previous financial year, were suspended when an employee tested positive for COVID-19 this week.
As per protocol, the employee had been screened a week earlier, yet the virus went undiscovered. It provides a stark glimpse of the challenges of mining in a COVID-19 world, where we will constantly question whether the safety regulations currently in place are enough to keep miners safe, while also supporting mining operations. This, when so much continues to be unknown about the virus.
As of May 5, the Department of Mineral Resources and Energy has executed a temporary Standard Operating Procedure (SOP), which will be utilised across mines, as an employee safety measurement, until a permanent set of guidelines are delivered.
The deadline for these permanent guidelines is mid-May, marking the introduction of a safer process of mining operations during the pandemic, and possibly even saving both lives and mines.
The Minerals Council’s perspective on the matter is that “government has adopted a pragmatic and practical tactic to fighting the pandemic while supporting the economy to survive the crisis,” and have furthermore committed to “working hard with government and organised labour in this national effort.”
Although the current global outlook is unpredictable (to say the least), analysts have projected a long-term bull market for gold.
JP Morgan Cazenove analyst explained in a recent report that “if markets stay orderly, we believe this environment should continue as very beneficial to both gold and silver”.
Considering the current weakness of the rand, compounded by South Africa’s recent credit rating downgrade and the larger macroeconomic impacts of COVID-19, the gold price is good news for SA gold mining firms.
“The outlook is very supportive given the global economic slowdown and the amount of liquidity injected into the global economy recently,” said James Wellsted, spokesperson for Sibanye-Stillwater.
As much as these are unknown territories in the mining industry and predictions are made tentatively, the gold market may be the place to watch for surviving financial blows in this industry.
Suppressing the COVID-19 outbreak and protecting South African lives, while getting the economy back on track is a monumental task in national coordination directed by sound and sober scientific judgement. Yet, with ‘feet on the ground’ and government considerations of both miners and economic safety in mind, alongside continued surges for mineral such as gold, the industry is on the road to stabilising.
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