South AfricaÂ’s Troubles to Raise Platinum Prices Long Term

IMPALA Platinum reported flat production from its mines in a difficult operational period, but there was a sound performance in Zimbabwe where tax changes threaten the existence of that country’s mining sector.

Implats is forging ahead with the second phase of growth at its subsidiary, Zimplats, to lift production threefold to 270000oz in 2014, but outgoing CEO David Brown warned that unless the investment climate in Zimbabwe improved it would not approve the third growth phase.

Implats, the most exposed of any South African mining company to Zimbabwe, is facing a big jump in surface rental fees that were recently legislated. Implats will have to pay $48,5m a year in rental fees under the new dispensation from $45000 in the past.

Work done by the Zimbabwe Chamber of Mines shows the fees will cost the domestic mining industry $1bn a year, which is what the industry generates in annual revenue. Mining companies are talking to the government to revisit the policy.

Implats lost 33000oz of platinum to safety stoppages in the interim period in what Mr Brown described as a “heavy-handed approach” by the Department of Mineral Resources. After talks with officials, there had been an easing of these stoppages, he said. Impala kept production from its mines flat at 738000oz despite the losses to safety stoppages.

“In our view, this is a standout achievement given the observable and significant effect which safety stoppages have had on the South African platinum group metals industry,” SBG Securities analyst Justin Froneman said yesterday.

Implats reported a 48% drop in refined platinum production from material delivered to its plants for treatment by third parties and for toll treatment. About 90% of this drop was ascribed to Lonmin not sending any more concentrate to Implats after a one-off shipment due to a strike at Lonmin mines.

Impala recovered about 15000oz of platinum from treating the “rats and mice” of tailings, waste, mine sludge and slag during the period.

Xstrata

A restive labor force and the demands of communities like Matlou are among the many challenges facing the mining industry in South Africa. The industry has been weakened by decades of underinvestment, as well as a debate over nationalization and other policy questions that have created uncertainty and spooked potential investors.

On Friday, the villagers of Matlou and their neighbors took five hours to march about 20 kilometers to the gates of an Xstrata platinum mine that is being transformed from a strip to an underground operation.

There, they presented demands that included putting more locals to work at the mine. But they don’t just want jobs. They say Xstrata should be building schools and roads and offering scholarships to promising young students.

“They fail us,” said John Modiselle, a community leader who said he had been bringing concerns to Xstrata for years.

Xstrata spokesman Songezo Zibi said he understood the impatience and frustration of villagers in a country with high rates of unemployment and poverty. But he said addressing South Africa’s inequalities would take time, and that mining companies could do only so much.

Specialized workers were needed to complete the shafts at the mine near Matlou, Zibi said. He said Xstrata could either train locals to do the work, slowing construction, or bring in outsiders with the right skills to get the job done quickly so the mine can start operating. Once mining starts, expected in 2016, many of the 3,000 people it will employ will come from the area, he said.

Xstrata had built a clinic and other community projects in the region and would do more once it started making a profit at the mine, Zibi said.

In a speech earlier this month, Mining Minister Susan Shabangu said mining companies would not be the target of so much anger if they had done more since apartheid ended in 1994 to ensure black South Africans benefited from mining. The black majority was long nothing more than the low-paid labor for the country’s mining industry.

Jonathan Snyman, a researcher at the South African Institute of Race Relations, said Shabangu had a point. But he said the debate over how to change the legacy of apartheid featured too much militant rhetoric from unions.

He said a less fractious relationship between management and labor — and fewer strikes — would reassure potential foreign investors who have the money to help modernize South Africa’s troubled mining industry.

Shabangu says that nationalization is not on her government’s agenda.

But Tseleng, among Friday’s marchers, said turning mines over to the government might be a way to ensure the wealth was fairly shared.

“If they implement it and it fails, then they can find another solution,” she said.

Tseleng said she and most of her neighbors were unemployed. She went to a well-regarded high school that Catholic nuns established in her village, then couldn’t afford to go on to university. But mining executives prosper, she said.

“They don’t want to uplift lives,” she said. “They just want to take money.”