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“Long Cold winters and Short beautiful summers”. This is the Mining Industry. Delivered by: Mr. Mike Teke. Today’s conversation…. This too will Pass! The Global Mining space The State of South African Mining The Impact of recent Labour Issues How do we stabilise the industry?.

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long cold winters and short beautiful summers
“Long Cold winters and Short beautiful summers”

This is the Mining Industry

Delivered by: Mr. Mike Teke

slide2

Today’s conversation…

This too will Pass!

The Global Mining space

The State of South African Mining

The Impact of recent Labour Issues

How do we stabilise the industry?

slide3

PWC Annual Mining Report Titles

  • 2005 “Enter the Dragon”
  • 2007 “Riding the wave”
  • 2008 “as good as it gets”
  • 2009 “When the going gets tough”
  • 2010 “Back to the Boom”
  • 2011 “The game has changed”
  • 2012 “The Growing Disconnect”
  • 2013 “A Confidence Crisis”
  • “This Too will Pass!”
slide4

Today’s conversation…

This too will Pass!

The Global Mining space

The State of South African Mining

The Impact of recent Labour Issues

How do we stabilise the industry

slide5

The Global Mining Space

  • Shifting Risks at the Global Level: The Game is Changing (E&Y)
  • (Countries want a bigger share)

2008

  • Skills shortage
  • Industry consolidation
  • Infrastructure access
  • Maintaining a social license to operate
  • Climate change concerns
  • Rising costs (cost inflation)
  • Pipeline shrinkage
  • Resource nationalism
  • Access to secure energy
  • Increased regulation
  • 2013
  • Resource nationalism
  • Skills shortage
  • Infrastructure access
  • Cost inflation
  • Capital project execution
  • Maintaining a social license to operate
  • Price and currency volatility
  • Capital management & access
  • Sharing the benefits
  • Fraud and corruption

Source: “Business Risks Facing Mining and Metals, 2012-2013, Ernest & Young

slide6

Changing World markets….

  • Since 2008, the global commodities markets have
  • been hit by the multiple effects of :
  • The slide into recession in Europe due to the sovereign debt crisis (a critically important market for platinum),
  • The slowdown in economic growth in China (from >10%p.a. in 2008 to 7.7% now),
  • The continued below potential growth performance of the US economy,
  • The global sovereign debt crisis (especially in developed markets – EU, USA, Japan),
  • The impact of quantitative easing (low interest rates and printing money) on commodity prices,
  • The recent drying up of liquidity towards mining projects (concern that quantitative easing is not working and the slower growth levels).

Source: Chamber of Mines

slide7

Rising urbanisation, 3 billion people to urbanise by 2050 (most of the growth in Africa)

World urban population growth (Billion people)

Source: UN, McKinsey

slide8

The Global Mining Space

    • Top 6 minerals, expected greenfield production growth for the period 2011-2020

Source: CitiBank

slide9

The Fraser Institute

  • Vision:
  • A free and prosperous world where individuals benefit from the
  • operator choice , competitive markets, and personal responsibility.
  • Mission:
  • To measure, study, and communicate the impact of competitive markets
  • and government interventions on the welfare of individuals.
  • South Africa has fallen down the rankings – 54/93 in 2012 to 64/96 in 2013.
  • Based on existing regulations and practice, S.A. is ranked 77 out of 96 countries in 2013 from 62/93 in 2012.

Comments;

1. Canada

Canadian mining regulation and legislation are generally easy to operate under

- A producer company with more than US$50M, Company president

2. Alberta

Strong mining province, open for business.

- An exploration company, Company president

3. New South Wales

Stable, not corrupt, has technical potential, skilled labour force, not too green, and sensitive to how mining assist remote development and usefulness of royalties. Pro-mining conservative government.

- A consulting company, Company president

Continued…

slide10

4. Australia in general

Across Australia, political and regulatory panic is seriously impacting the quality and timeliness of decisions, and certainty about access to land is very concerning. The “Twitter” factor is determining political attitudes and actions, and regulators are reacting to minimize the perceived “risk exposure” of their ministers.

- A consulting company, Company president

5. Botswana

Can get work done. Reasonable approval process. Not excessive regulations. Clearly pro-mining culture. Honest civil servants

- A producer company with more that US$ 50M, Manager

  • 6. South Africa
  • Strikes, demonstrations, military killing workers.
  • An exploration company, Vice- president
  • Country with an unworkable political structure
  • - An exploration company , Company president

7. South Africa & Zimbabwe

Both South Africa and Zimbabwe are driving social experiments not driven by logic and economy, but by ideology. In the absence of reason, primary industries become the cash cows to fund the un-fundable. The rise of oligarchs in both countries evidences decline.

- An exploration company, Vice-president

Source: Fraser Institute 2012/13

slide11

Today’s conversation…

This too will Pass!

The Global Mining space

The State of South African Mining

The Impact of recent Labour Issues

How do we stabilise the industry?

slide12

The South African Mining Industry

  • SA’s Mineral Value: 6 main commodities

PGM’s:

254.3T produced in 2012, with Pt. accounting for 128.6T. #1 producer in the world, 2nd largest mineral export, 199215 employees.

Manganese:

8.8MT produced in 2012, accounted for >20% of global production, 8646 employees.

Gold:

167.2T produced in 2012, accounted for 6% of global production, ranked 6th largest in the world, largest component of mineral exports, 142193 employees.

Diamonds:

7 million on carats produced in 2012, accounted for 12% of global production, 12081 employees

Iron Ore:

67 MT produced in 2012, 4th largest component of mineral exports, 23368 employees.

Coal:

258.6MT produced in 2012, largest part of mineral sales, 3rd largest component of mineral exports, 83245 employees.

Source: Chamber of Mines

slide15

The recent negative news items have resulted in an

underperforming mining index on the JSE

slide16

Unfortunately, mining has been the worst performing sector of the

SA economy over the past two decades

slide17

Health and Safety is Key

  • Zero Harm is still the Goal
  • Section 54s
slide18

Today’s conversation…

This too will Pass!

The Global Mining space

The State of South African Mining

The Impact of recent Labour Issues

How do we stabilise the industry?

slide19

Confluence of factors have served to complicate the

labour market situation

Political opportunists seeking to capitalise on the situation

Workers battle garnishing orders and too much exposure to micro credit

Poor service delivery by municipalities, insufficient bulk infrastructure, land for settlement

Rapid urbanisation (fastest in Africa, people seeking jobs in platinum belt)

Labour unrest

Inter-union rivalry

High poverty rates

Perception that mines are not doing enough to help local communities

Increasing levels of protest against poor service delivery (average 8.8 protests per month in RSA)

High unemployment rates (26.2% versus national average of 24.9%)

Perception that mining companies can pay much higher wages

Source: Chamber of Mines

slide20

Elephants in the Room…

  • AMCU is here…
  • Resource Nationalism/Beneficiation debate…
  • Safety, Costs and Productivity(Work Ethic)…
  • Transformation

Source: Chamber of Mines

slide21

Today’s conversation…

This too will Pass!

The Global Mining space

The State of South African Mining

The Impact of recent Labour Issues

How do we stabilise the industry?

slide22

How do we stabilise the industry?

  • Acknowledgement that the Game has changed in the Labour front…
  • Begin to engage on Productivity(Work Ethic) and Growth matters…
  • Accelerate on economic Growth enablers like skills development, investment , infrastructure development etc…
  • Eradication of Negative Messages about our Country!
  • Accelerate delivery on the Transformation agenda- This is about Hope!
  • This Too will Pass!

Putting South Africa First…