To take advantage of a vast mineral endowment, governments will need to overcome persistent problems with power, transportation and corruption
By Gavin du Venage, African Editor
The Investing in Africa Mining Indaba 2023 is back in its usual February slot, following the COVID-19-related disruption last year that saw it run in May. The central theme of this year’s event was South Africa’s ongoing infrastructure and power crisis which has degraded the abilities of mining firms to operate and export their products. Currently, the country is experiencing power cuts of up to 12 hours a day. This added to ongoing disruptions at state-run ports and railways, has damaged mining productivity.
Industry output shrunk more than 7% in 2022, according to figures released during the Indaba by StatsSA, the state-managed statistic unit.
Duncan Wanblad, CEO of Anglo American told the Indaba that the country was running out of time to tackle the “three scourges” of power cuts, broken logistics and corruption. “They are three fundamental issues that unless addressed will really inhibit growth and transformation in the country. And I don’t think that it is OK for business to sit quietly by and watch that happen,” he said.
The business was ready to help alleviate electricity shortages, but until recently the governing African National Congress (ANC) refused all private sector initiatives. This has begun to change as the ANC realized it could not solve these issues on its own. “After years and years to reach a state of crisis, the government has finally taken to liberalizing energy,” Wanblad said.
The state had abolished licensing requirements for self-generation of up to 100 megawatts (MW); for reference, a deep-level gold mine consumes around 20 MW during operations. Companies could now self-generate and sell the excess to the grid. Wanblad said Anglo was developing wind, solar and fuel cells at its mines and plans to have 3.5 GW plus storage operating in the coming years.
For mining companies, green energy was no longer merely about social investment but survival. Rio Tinto will install 140 MW at its operations in Richards Bay on the east coast, said Sinead Kaufman CEO of Minerals at the Australian listed firm. The company planned to generate much more electricity than it needed to provide power to downstream operations that were important to Rio Tinto’s own business. “This is not just about mining, but also smelting, manufacturing and other industries that need electricity,” she said.
Even South Africa’s mining and energy minister Gwede Mantashe appeared to be coming around to the idea of self-generation. Noting that mining output had declined significantly last year, largely due to loadshedding, Mantashe said some companies had manage to buck the trend. “Gold Fields managed to increase its production by 10%, because they are taking action,” Mantashe said. Gold Fields has installed a 40-MW solar plant and is one of the first miners to reduce its dependence on the state electricity grid.
Mantashe has been a fierce defender of coal generation, which currently provides most of South Africa’s electricity. Lately though, as the country’s electricity crisis has grown worse, he appeared to have a change of heart. “We are open for ideas — anyone with a useful suggestion, we will listen to,” Mantashe said. Companies were now free to generate their own electricity, with no permits needed, he added.
Mantashe also used his time to announce a $10 million junior mining fund. The amount designated was small he acknowledged but said this would be increased once the fund established its value. South Africa has struggled to attract junior miners in recent years, and Mantashe said this money would hopefully draw interest once again from smaller investors.
It has become practice to announce new developments at the Indaba, such as the example above — however, Mantashe’s speech made no mention of a cadastre system that has been long promised but yet to be implemented.
Most investors agree that it is vital to have a way to check what exploration licenses have been issued, and where exploration potential lies. Many mining destinations have websites that allow explorers to see where licenses have been issued. Unusually, South Africa still requires explorers to submit queries in writing, and must wait months for a reply, if it arrives at all.
“An explorer can follow the rules and submit the paperwork, only to find his application is now second in the pile,” said John Paul Hunt, senior exploration geologist at SRK Exploration Services. “All this adds to the risk of the venture. The result is very little exploration taking place here. The reason we have so little exploration is not because of low prospectivity, but because of our jurisdiction.”
Hunt said that South Africa had an extraordinary wealth of minerals. In a 300-mile radius around Johannesburg, the country had vast deposits of gold, platinum, iron and coal. Even its now largely exhausted gold industry still had life left in it.
“The amount of gold left in the Wits basin is still more than most of the world’s mines combined,” Hunt said. “The issue is whether it is economically viable to get it out.”
The U.S. is now taking a much greater interest in mining in Africa, but also the world beyond, Jose W. Fernandez the Under Secretary of State for Economic Growth, Energy, and the Environment at the U.S. Department of State told the Indaba. The U.S. had established the Mining Support Program to look at projects around the world. Initially, around 200 projects were identified although this has been whittled down to 12. The idea is to develop mining activity, but also complimentary activities such as smelting and refining. The U.S. was determined to secure access to primary resources, Fernandez said: “We are all in for Africa, and have been for a very long time,” he said.
U.S. mining interests were also being expanded in Southeast Asia, which has traditionally been bypassed. New commodity discoveries such as rare earths and the potential for smelting and refining were being explored.
Fernandez noted that mining was also attracting attention from investors outside the sector. For instance, U.S. automaker Tesla had announced its intention to source raw materials directly. “Tesla is going into the mining business, and other automakers are sure to do the same. It’s a once-in-a-lifetime opportunity for African resource economies,” Fernandez said. “They should make the most of it while they can.”