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In general, mining companies will have to take a “fair
amount of pain “while struggling against the impact of a 21-day lock, while some
it may not survive at all, an industry expert warned.
In a phone interview with Fin24 on Tuesday, Mergence
Corporate Solutions Director of Mining Peter Major spoke on the impact of the
national closure, instituted on March 26, 2020 to stop the spread of
COVID-19 outbreak.
“In general, it is the small mining companies that
will be most affected by the 21-day blockade, “Major said.
The South African Minerals Council, which represents the
Most of the industry has said that it supports the government’s 21-day blockade,
But he warned that its impact on the industry will be “significant”.
The Council hopes to provide information based on its
modeling in the next few days. Harmony Gold has already warned of a significant drop in gold
production as a result of the blockage.
Meanwhile, companies can submit a request to the Department of
Mineral resources and energy to continue limited operations during this time – primarily care and
maintenance in underground operations to avoid possible damage caused by the
cessation of operations. DRD Gold and Impala Platinum are among those companies
that have been applied to the government.
The sector has suffered some hard knocks over the years, such as
such as fighting volatile commodity prices, strikes that have disrupted operations
for months, as well as the detachment of the load.
This blockage could lead to a mix of responses from
the sector, with some mines closing and others “just” noticing it,
according to the major.
Major believes that companies that have “weak or
questionable foundations “or credibility can be erased. Listed, large
capitalization companies that have “gone through so much” in the last three
decades will be better able to resist the impact of the blockade, he
he argues.
“The last 20 years have been crazy, they have taken
additional measures, “Major said of the latter, which is generally stronger
balance sheets, and have ensured that they have strengthened operations during the
years.
Major creates platinum mines, coal and iron ore mines and
Manganese mines stand a chance of fighting once the crisis is over. Have
passed by the mill. They have solid balance sheets and can afford to go
disconnected for three weeks, “he told Fin24.
These mines are used to being closed by communities,
unions, or even government, Major said. “They will survive. They may not
make so much money, but they’ve been through bootcamp over and over, “he
additional.
Some small and medium-sized companies, which may not have strong
sufficient balance sheets and “decades of experience and diversification”
it will be more affected by the virus, he said. They could continue to operate if
They manage to find funds to keep operations going.
“The underground mines will also suffer greatly as they leave
Inactive underground areas for more than a few weeks begin to cause
problems. And unfortunately, they are the ones that use the most
workers, “he said.
‘A beautiful funeral’
Coal miner Kuyasa Mining has had to shut down its operations
for the duration of the crash. CEO Ayanda Bam spoke frankly about the
situation, labeling it “bad”.
Kuyasa employs around 600 workers, including contractors. Their
The largest customer is Sasol, who has since reduced the demand for coal due to the
emergency shutdown. In a notice to shareholders on March 31, 2020, Sasol said that some of its plants
You may have to reduce performance due to lower customer acquisition due to
emergency shutdown.
Kuyasa has felt the impact of lower fuel demand from
consumers
“Sasol is critical in the market for the supply of
fuel has affected us, “Bam said. The coal industry was not doing well.
Before the blockade either, Bam wailed.
“As we want in this block, things really didn’t go
good for the coal industry. Sitting and without producing coal, without having
income and having to put operations in care and maintenance, which costs
money. You can’t just walk away from an underground mine, “he said.
When asked if Kuyasa had any contingency plans in the case
the blockade to extend, Bam said companies and the government may need
to find unconventional solutions. “We are only passengers on a trip. I
I think there is no one who can plan it, “he said.
Bam proposed that mining companies be allowed to dive into
their rehabilitation funds to help them overcome this obstacle. Currently business
They all request help from the banks and have the support of the government. But
mining companies have been reserving money for rehabilitation to be used in
end of mine life: they should be able to use a certain percentage of
those reservations in the meantime.
“Those with enough life ahead of them to
rebuild, you must have access to rehabilitation funds, “Bam said.
If some companies are going to die in two months, due to
In the crisis, they will also die with those unexploited funds. “Essentially you
will have a beautiful funeral, “said Bam.
Recovering from Covid-19
Commenting on the sector’s recovery prospects below
the crisis, Major expects that post-crisis reductions will only be
implemented as a last resort, to keep a company alive.
“No company wants
dig in. You only shrink when you lose money and go to
zero. No one wants to go to zero, “he said.
Some companies may have to
reduce if there is limited demand for your products. But the eldest is
optimistic that as other companies return to their economies,
must rely on basic products for the development of the required infrastructure, as well as
Normal consumption requirements.
“The prospects are better for SA than for many others
countries. We have a very established mining industry, “he said.
the
the weaker rand also offers some protection, and the products are quoted at
dollars, SA is about to win. The rand violated the R19 / $ brand just a few days later
Fitch lowered the country’s debt further to the junk state and currently
floating at the R18.30 / $ level.
“All mines can be profitable at this level
and can even be profitable on R16-R17 [to the greenback]”said the oldest.
In accordance with the latest monetary policy of the Reserve Bank
Review, published on Monday, the coronavirus crisis could see the production side
The economy, which includes the mining sector, contracted 2.6%. The reserve
The Bank also projects job losses of 370,000 and up to 1,600 companies
closing.
Speaking more broadly about the economy, in a briefing on
review, Reserve Bank Deputy Governor Rashad Cassim said the ability of
businesses to survive after the crisis depend on whether some relief is provided
to them
“If that relief does not come, companies can close
down, “he said.
