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President Cyril Ramaphosa must allow South African mines to operate at full capacity as the national coronavirus blockade risks crippling the industry, according to Sibanye Stillwater.
Last month, the government allowed miners to restart operations with half their normal workers amid concerns that the closures could harm the viability of the country’s deep-level mines. That is not enough, Sibanye Chief Executive Neal Froneman said in an interview Tuesday.
“Labor intensive mines cannot continuously operate at these levels, so they will have to be restructured or closed,” said Froneman, whose company operates gold and platinum operations. “You cannot continue to produce at a loss.”
While Ramaphosa has been praised for its swift response to the pandemic, Banco de la Reserva SA expects the South African economy to contract 6.1% this year. The government must balance the threat to 450,000 mining jobs with the risks of the virus spreading in narrow wells that reach more than three kilometers underground.
“We are causing more harm by restricting the economy than we are positively impacting on Covid-19,” said Froneman. “We have gone too far now, now we need the economy to start working.”
South Africa’s mining industry contributed 8% of gross domestic product last year. Each industry employee supports at least 10 dependents, according to the Minerals Council South Africa, an industry lobby group.
As the country’s mining companies follow strict health protocols, including screening and testing for Covid-19, they can take advantage of their experience working with employees with tuberculosis and HIV / AIDS, the CEO said. South Africa has the highest number of people with HIV in the world and widespread tuberculosis.
Sibanye, the world’s largest platinum miner, and Harmony Gold have suspended the orientation, while Anglo American Platinum and Impala Platinum have lowered their production forecasts. South Africa produces 75% of the world’s platinum and around 40% of the palladium.
South Africa’s labor-intensive mines must have a minimum of 75% to 80% capacity to be viable, Froneman said.
While a weaker rand, which cuts costs for the country’s producers, and a rebound in precious metal prices has provided a buffer, the mining environment threatens to deteriorate in the coming months.
“We have to increase production to return to profitability because it is going to be even more difficult,” Froneman said. “It will be more difficult to survive in the next two quarters if we are stuck at 50%.”
