On-The-Air (02/09/2016

Every Friday morning, SAfm’s AMLive’s radio anchor Sakina Kamwendo speaks to Martin Creamer, publishing editor of Engineering News and Mining Weekly.  Reported here is this Friday’s At the Coalface transcript:

Kamwendo: CEOs warned this week that platinum mining is going to ‘drop off a cliff’ because of huge under investment. We know what happened with further announcements of people taking their monies and running.

Creamer: The platinum business is a very important business to South Africa. We in the Southern African region supply 80% of that. The world needs to use more and more of it, because it cleans the air. What the CEOs of two major companies warned this week is that South Africa is not producing anywhere near the forecast demand for platinum. In fact, Terence Goodlace, from Implats, said yesterday that platinum mining is going to ‘drop off a cliff’ if we continue along the current route.

The underinvestment has been so severe that unless platinum mining companies start investing now in their orebodies, ahead of the upturn – they are waiting for the upturn, of course, because price is so low – but unless they start moving ahead of that, the warnings from CEOs, from Northam CEO Paul Dunne as well, is that South Africa is not going to have enough supply of platinum.

They are talking about the need for 9-million ounces by 2025, and that is not long away in mining terms, and how South Africa is going to be lucky if it can produce 4-million ounces this year. Next year they are forecasting less then 4-million ounces. At the same time, recycling, because of the low price, is not happening, so you can’t rely on that.

Many were saying that there is a lot of liquid stocks on surface and that is what is keeping the price down. They are estimating that at probably only 2-million ounces. So, you are not going to meet that demand. Obviously we are hoping for big demand, because we see a lot of car companies wanting to switch to the fuel cell.

That is going to be intensive on platinum particularly. There is also going to be a huge need for autocatalytic catalysis and that is important because it keeps the air of Tokyo and London and all other big cities, clean through the platinum catalysts in the exhaust pipes of cars. Those regulations are getting stricter and stricter.

You can see even in China now they are uplifting those regulations. So, everything points to demand being there. Already they are talking about a supply deficit and surface stocks are having to come to the rescue. They are saying, start now to capitalise.  I must say that Northam Platinum has got four projects on the go, because they foresee the supply shortfall. On their Booysendal South Project now, they are investing more than R4-billion.

There are four projects all together that will make sure that they can do something. Impala Platinum is continuing with its Shaft 16 and 20 projects, but that is really for replacement and overall there is still a global deficit. They are warning that a lot of the shafts that were 30 year shafts are now 40 years old and you can’t go on mining these forever. Also, the mining companies have tended to go for the richer reef like the Merensky Reef.

The industry went for that first and now it has been depleted particularly on the Western Limb of the Bushveld. They are having to go for the lower-grade upper group two reef, which is the UG2 reef. That is more costly to mine and often a lot of the scattered type of mining that they are having to face does push up cost. This all points to doing more with capitalising orebodies which are so valuable. This is national patrimony. It belongs to all the people of South Africa.

Kamwendo: The CSIR warned this week that mining needs a major change of mining method to survive.

Creamer: That was by May Hermanus, who has got deep experience in the mining industry. She was the former Chief Inspector of Mines and has gone into deep research in the CSIR for the last few years. She said that if we continue to mine in the way we mine now, platinum has got 13 more years and gold 17 more years. So, she is saying that we have to move towards a different method of mining, which she is calling continuous mining.

Again, using the word mechanisation, which a lot of people are saying is really just big modernisation, because the labour intensity is actually going to put a finite element onto these orebodies that we have got, because we are not going to be able to mine them productively if we continue the same method. Again, this was reiterated by the CSIR’s May Hermanus. We know that the Mining Phakisa has taken place and a lot of effort has gone into that.

They are looking for a mining cluster to be developed and in that cluster there will be a lot of research and development. They know that if they go to continuous mining, which is rock around the clock for 365 days a year, that is going to involve a different form of mining, which is going to be less labour intensive. So, they are saying if we develop this mining cluster now and we develop the new equipment, then new skills are going to be needed.

Hopefully the job losswill be minimal, because we will be needing additional jobs to create the equipment. So the Mining Phakisa is now urging people to go ahead with the modernisation to save the mines and at the same time save as many jobs as modernisation can. In the meantime, if we look at the way that we are mining, it is very wasteful. In gold mining, you have got to leave 40% of the gold behind as pillars. For every 100 grams of gold in the ground, only 25 grams is coming on to surface.

Kamwendo: Chrome mining is become strategic for the platinum mining industry.

Creamer: With the move towards the UG2 Reef and less Merensky reef, which is the richer reef, you have the UG2 reef, which has got chrome in it. So now platinum miners aren’t only platinum miners; they are also chrome miners. As Northam Platinum said this week, as it is growing its suite of new projects, it is going to end up with a lot more chrome.

They are talking about a million tons of chrome. They have to see this as strategic and as part of a by-product that adds to the business. They actually employed the big Glencore to make sure that they can market this throughout the world properly.

Kamwendo: Why are miners paid in rands when gold and platinum is sold in dollars?

Creamer: Thank God that we are being paid in rands at the moment. If you look at the Zimbabwe mines now and all their costs are in dollars, even the platinum mines there are struggling to a much greater extent then our mines. The saving grace that we have is that our costs are in rands and our selling prices are in dollars. This is saving the industry at the moment. If you look at the rest of the world, where their costs are in dollars, they are not doing well at all.

Kamwendo: Thanks very much. Martin Creamer is publishing editor of Engineering News and Mining Weekly.