On-The-Air (22/07/2016)

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: Turning Joburg’s mine dump sand into gold is adding R14-billion to the South African economy a year.

Creamer: There is money in muck and you see that when you go out to Brakpan. You realise that we still have a mining legacy here. We are in the last phase of mining in this golden city and you go out there and when there was no activity, there was just dust and pollution. Now that they are taking those mine dumps and they are processing the material from them, and turning it in to gold, that activity is putting R14-billion worth of value into our economy a year.

We see the gold price is in a sweet spot at the moment. The dollar price is getting very solid. Interestingly Ergo’s costs are flat. Although their costs are in rands you think there would be an inflationary aspect, but they are holding their costs down. So you can see the cash starting to move out of these wonderful technical achievements that remove an eyesore, a creation of dust, and turn it into billions of rands worth of profit.

DRDGold is doing everything it can to make sure every bit of value is recovered but also that the dust doesn't enter atmospher. They are suppressing all the dust and putting vegetation on it. The big thing is that water is required, they need a lot of water, when you process these dumps, you need a lot of water. But the good news is that DRDGold is not putting any strain on Rand Water. They have gone in and are converting sewage water and recycling that.

They are also taking acid mine drainage (AMD) water and using that. That is an important lesson as well for AMD. The government is talking about enormous amounts of money that they want to spend, tax payers’ money. The government is saying that they are going to put another R10-billion to eradicate AMD. But what the government should be saying that they are going to get R10-billion out of it, as DRDGold is doing with the mine dump waste.

You can see that there are so many wonderful spin-offs there. DRDGold is looking at poverty alleviation in the area, showing people how to grow vegetables. I was stunned, from a little vegetable patch the size of a front door you can feed families. It is amazing how many people are taking this seriously now. Some people are going in to it full time, actually growing these vegetables for sale. They have sparked that through going into the poverty alleviation side area. Also youth development, there are 500 youth receiving maths, science and accountancy lessons.

All because DRDGold has managed to turn waste material to positive account and they are looking to do a lot more. We can see that they probably will succeed in extracting more gold out of this waste, because of the technology that they are using. It shows you that there is money in muck. The government should realise that in AMD there is a lot of money there. I get disturbed, because we show them and tell them but they won’t take calls. I’ve got certain experts and I’ve personally asked them, as their civic duty, to go to the government and show the government how to make money out of AMD. But they get no response.

Kamwendo: The new Taxation Laws Amendment Bill has muddied the waters just as hopes of tax reform were beginning to rise

Creamer: You had the Davis Tax Committee. People were actually talking to that committee, particularly around mining royalties. They had a session and there was a lot of listening by the Davis Tax Committee, taking it all in. There were hopes rising that all the anomalies would be moved out of the way and that took place on May 13.

On July 8, we have this crazy Taxation Laws Amendment Bill popping up out of nowhere, which suddenly reverses what looked like were going to be gains and timeframes that you are allowed to put your tax in. There were 12 months suddenly pushed back to six months. You have to do a lot of guess work when they push these timeframes through, but they want to penalise you if you are wrong. So if you guess wrong they then penalise you.

You have also got to estimate correctly what the royalties are going to be. The estimation becomes very complex so you have got to do it in a very rushed fashion. They want to now give the tax commissioner the power to estimate if he thinks you are wrong. This should have been done after you have got clarity. The Davis Tax Committee is trying to create clarity on all these tax issues. Get the clarity first then you can start introducing commissioner estimates, but don't do it before.

This is the sort of situation that knocks investment back, because if you get tax uncertainty people will not invest. They all agree that this royalty tax is right, because the metals and minerals belong to the people. So, if you are going to deplete some of those, you must pay something in, compensation and all agree.

Even if they make a loss they have got to pay, this is how it is. You make losses, you still pay and they are prepared to do that. If things are good they will pay up to 7% in addition to all the other taxes. But, they don’t like the lack of clarity and if you don’t have clarity, you don't have competitiveness and people won’t invest.

Kamwendo: A new ruling shows that the courts won’t easily endorse the new Mining Charter’s blunt arithmetical quotas.

Creamer: These sort of blunt arithmetical quotas that have come through with Mining Charter three. This is the third iteration. Wwe have a new Minister and a new Mining Charter. It has been very robust in the way it has imposed quotas.

This case that come through the Constitutional Court, Solidarity taking on the government’s Correctional Services Department, which has implication now for the Mining Charter, because you can see that the Constitutional Court says that this is not legitimate affirmative action. You can’t just say that because a disabled person is white they are no longer disabled.

There are all sorts of blunt aspects that are coming through, which the Constitutional Court has said is not legitimate affirmative action.

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