Gold mid-tiers’ Q3 2024 fundamentals
All-time-high gold prices combined with relatively-contained costs catapulted unit earnings to another epic record.
While the mood at the recent Junior Indaba mining event was sombre when it came to South Africa’s policy environment, there were some interesting opportunities being mooted for minerals like lithium.
Hennie Theart SRK
“The absence of the platinum group elements in this outlook was notable, and this may indicate the anticipated move from internal combustion to electric cars,” said Theart. “Given the natural abundance of lithium, however, it is unlikely that the demand for lithium will be linked to a sustained increase in the value of this commodity.”
He said it would also be interesting to see whether an extended period of lower fuel prices would slow down this trend.
The biggest dampener to the market’s growth was the slowdown in Chinese investment, followed by risks related to trade policy and geo-politics. This meant that the dominant theme among mining corporations for the next year was expected to be technology innovation and automation – both strategies to reduce cost and increase profit.
Lesley Jeffrey SRK
On the South African scene, the main concerns included policy uncertainty and permitting issues, according to Lesley Jeffrey, principal geologist (coal) at SRK.
“Among the issues that the industry is struggling with is the length of time it takes to get mining, water and environmental permits from government,” said Jeffrey. “Uncertainty in mining policy was also having a negative impact on investment, especially foreign investment.”
Since the Junior Indaba, the June announcement raising various requirements in the Mining Charter will have added to the concerns about the investment environment.
“When speakers discussed which countries are currently popular for exploration investment, they focused on North America, West Africa and Australia,” she said. “It was clear that SA was not seen as a good investment destination at the moment due to the policy uncertainty and permitting issues.”
Given the focus of the event on smaller players in the sector, the legislative burden on junior mining companies was raised – even leading to the suggestion of a ‘lite’ version of the Minerals and Petroleum Resources Development Act that would ease requirements for small mining companies. In a similar vein, the tax and royalty burden on mining companies also came under scrutiny.
Despite the difficult economic conditions, overall sentiment for the coming year was reported as positive; CRU research showed that 53% of respondents were hopeful about the future, while a substantial portion of around 33% were undecided.
This level of optimism was probably driven by the recovery – in the last quarter of 2016 – of the steam coal market and the temporary recovery in ferrous metals, said Theart. He highlighted that while ferrous metals fell back somewhat during the first part of 2017, the impact was offset to some extent by an increase in base metal demand.
Jeffrey highlighted the lessons shared by industry ‘legends’, which included the warning that the while the orebody dictates, correct management is still the key to successful mining.
“The speakers also encouraged us to get our hands dirty – to put in the hard work and to not expect something for nothing,” she said. “There was also the timely warning that money has no loyalty, and that it will go where the best returns are to be found.”
Lack of data sharing amongst industry players was discussed, and it was proposed that the Council for Geoscience could play a role with other government stakeholders to facilitate an improved access to data. Growing energy demand in the region also inspired presentations on coal and coalfield-linked power generation.
