South Africa Mining Report Q1 2013
Business Monitor International, November 2012, Pages: 77
The past decade of stagnation and decline in South Africa's mining sector is set to end as several projects across South Africa's vast mineral wealth come online in the next five years. We expect South Africa's mining sector value will reach US$36.9bn by 2017, from US$33.2bn in 2011. South Africa's mining sector is amenable to investment in the sector with few obstacles confronting foreign investment. The government is generally stable and its business environment is one of the best on the continent.
Stagnation To End, But Global Share To Decline
While South Africa's mining output growth is set to pick up over the coming years, we expect the country's share of global output to continue to decline as other major mining countries see faster rates of growth, most notably China and Australia. In addition, we expect investment, particularly in gold, to be increasingly attracted to low-cost, high resource opportunities in the rest of the continent such as the DR Congo and Ghana. This scenario is likely to be replicated in the diamond and iron ore sectors as growth elsewhere, mainly Zimbabwe and West Africa, respectively, makes South Africa less attractive for opportunities.
Modest, But Stable Growth Coming
Following the massacre at Marikana in August we expect the government to impose greater regulation on the mining sector that will increase costs for companies operating in the country. This will most likely take the form of more stringent safety regulations and working conditions. Furthermore, the ANC elections later in December will likely see the incumbent, Jacob Zuma, challenged by Kgalema Motlanthe who has expressed support for nationalisation of the mining sector. While we do not expect nationalisation to occur, it is likely that the government will seek to appease more radical elements within the party and electorate by adopting some form of resource nationalism such as higher taxes or a share of projects owned by the state. Finally, the precedent set by Lonmin offering a 22% pay rise for workers has given a benchmark for future pay negotiations. While we do not expect this 22% to be replicated, it is likely that workers will seek double-digit wage increases over the coming months. Given that mining sector margins in South Africa are among the lowest in the world already and wages account for around 50-60% of mining companies' costs, this will likely make South Africa an even less attractive investment destination.
Executive Summary 5
SWOT Analysis 7
South Africa Mining Sector SWOT 7
South Africa Business Environment SWOT 8
Global Mining Outlook 9
The Global Mining Outlook For 2013 9
Table: Recent Tax Increases 9
Africa Mining Outlook 16
Africa: Mining Sector Outlook 16
Table: Recent Government Intervention 17
Market Overview 21
South Africa – Q1 2013 21
Table: South Africa – Main Expansion Plans 23
Table: South Africa – Mining Industry Value & Production 23
Industry Forecasts 24
Coal: Turnaround On The Horizon 24
Table: South Africa – Major Expansion Projects 25
Table: South Africa – Coal Production (mnt, unless stated otherwise) 26
Diamonds: Sector To Slowly Return To Former Levels 27
Table: South Africa – Largest Diamond Projects 28
Table: South Africa – Diamond Production (mn carats, unless stated otherwise) 28
Gold: Harmony Gold To Reverse Output Decline 29
Table: South Africa – Major Expansion Projects 30
Table: South Africa – Gold Production (mn ounces, unless stated otherwise) 31
Iron Ore: One Bright Spot For South Africa 32
Table: South Africa – Major Iron Ore Projects 33
Table: South Africa – Iron Ore Production (mnt, unless stated otherwise) 34
Platinum: Uncertain Outlook To Weigh On Growth 35
Table: South Africa – Largest Platinum Expansion Plans 36
Table: South Africa – Platinum Production (moz, unless stated otherwise) 37
Palladium: Anglo American To Drive Steady Output Growth 38
Table: South Africa – Largest Development Projects 39
Table: South Africa – Palladium Production (mn ounces, unless stated otherwise) 39
Regulatory Development 40
South Africa Q1 2013 40
Africa Business Environment Ratings 42
Africa Q1 2013 42
Table: African Government Intervention 42
Table: Africa – Mining Risk/Rewards Ratings 43
Competitive Landscape 48
South Africa Q1 2013 48
Table: Select Companies – Financial Data 49
Company Profiles 50
Anglo American 50
Table: Anglo American's Key Financial Data 53
Impala Platinum 54
Table: Impala Platinum's Key Financial Data 57
AngloGold Ashanti 58
Table: AngloGold Ashanti's Key Financial Data 60
Commodity Strategy 61
Monthly Metals Update 61
Iron Ore: No Return To Highs 62
Aluminium: Further Gains Ahead 65
Nickel: Gains To Disappear 69
Tin: Major Gains Behind, But Outperformance To Continue 71
Zinc: Little Room For Optimism 72
Table: Select Commodities – Performance & BMI Forecasts 73
Business Environment Ratings Methodology 74
Table: Mining Business Environment Indicators 75
Table: Weighting Of Components 76
Company Profiles
Anglo American
Impala Platinum
AngloGold Ashanti
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