South Africa Mining Report

Published 07 April 2015

  • 102 pages
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South Africa Mining Report

BMI View: South Africa's mining sector growth will remain subdued as the country's gold and platinum sector face diminishing margins and industrial strife. Additionally, the coal and iron ore sectors will come under pressure as weak prices will dent production output over the coming quarters.

Vast untapped mineral reserves, supportive government jurisdictions and few obstacles prohibiting foreign investment make South Africa's business environment one of the best on the continent. Despite this, weak mineral prices and continued labour unrest will curb the country's mining sector growth outlook over the coming quarters. We expect South Africa's share of global mined output to decline as other mining jurisdictions experience faster rates of growth. We expect investment, particularly in gold mining, to be more attracted to low-cost, high resource opportunities in the rest of the continent such as the Democratic Republic of Congo. We forecast South Africa's mining industry value to grow from USD32.8bn (billion) in 2015 to USD37.0bn in 2019. This represents an average growth of 2.5% year-on-year (y-o-y) over 2015-2019, significantly lower than the average growth of 9.3% y-o-y observed over 2005-2014.

Subdued Growth
South Africa - Select Mineral Production % Growth y-o-y

Labour unrest will continue to pose a major challenge to the country's mining sector. The precedent set by Lonmin to raise wages by 22.0% in 2012, in the wake of the Marikana strike, has provided a benchmark for future pay negations. Rising cash costs combined with weak mineral prices will slash miner's profit margins, which will mean that miners will be increasingly unable to meet higher wage demands, setting the stage for further labour unrest and strikes. Furthermore, the ongoing competiton between the sector's two major unions, the NUM and AMCU, will force wage demands higher as both seek to outbid each other. Given that mining sector margins in South Africa are already among the lowest in the...

Table of Contents

BMI Industry View
7
SWOT
9
Industry Forecast
11
Coal: Price Weakness To Curb Growth
11
Chinese Curbs Present A New Concern
13
Some Important Bright Spots Remain
14
Table: South Africa - Major Coal Projects & Expansions
15
Indian Investment Ahead
16
Positive Infrastructure Developments
17
Currency Depreciation To Support Operations
18
Table: Coal Production Forecast (South Africa 2011-2019)
19
Diamonds: Subdued Growth Ahead
19
New Discoveries Bolster Growth Outlook
20
Downside Risks
21
Table: South Africa - Largest Diamond Projects
21
Table: Diamond Production (South Africa 2013-2019)
21
Gold: Weak Prices To Fuel Unrest
22
South Africa To Lag Peers
25
Potential Positive Upside
27
Table: Gold Production Forecast (South Africa 2013-2019)
27
Iron Ore: Modest Growth Amidst Price Weakness
28
Table: South Africa - Major New Iron Ore Projects & Expansions
31
Troubles Lie Ahead
31
Table: Iron Ore Production Forecast (South Africa 2013-2019)
31
Platinum: Modest Uptick After Decade Long Decline
32
Wage Costs Will Continue Rising
33
Depleting Reserves & Power Constraints To Raise Costs
35
Revenue Decline To Drive Divestment
35
Table: South Africa - Platinum Mine Production & Growth
36
Palladium: Output To Stagnate
37
Table: South Africa - New Palladium Development Projects
38
Table: Palladium Production (South Africa 2013-2019)
39
Industry Risk Reward Ratings
40
South Africa Risk/Reward Index
40
Rewards
40
Industry Rewards
40
Country Rewards
40
Risks
41
Industry Risks
41
Country Risks
41
Table: Mining Industry Forecasts (South Africa 2013-2019)
42
Africa Risk/Reward Index
43
High Risks, Large Rewards
43
African Countries Trend Lower
44
Table: Africa - Mining Risk/Reward Index
45
Regulatory Development
46
Trade & Investment Risk Analysis
46
Commodities Forecast
50
Commodity Strategy
50
Ferrous Metals
50
Iron Ore: Further Price Declines
50
Steel: Weak Iron Ore Prices Will Drag On Steel Prices
52
Non-Ferrous Metals
55
Aluminium: Supply Growth To Mute Price Gains
55
Copper: Only Modest Multi-Year Recovery
56
Lead: Prices Weakness To Subdue Production Growth
57
Nickel: Short-Term Weakness To Abate Over Coming Quarters
59
Tin: Export Curbs Will Eventually Bite
60
Zinc: Outperformance Set For 2015
62
Table: Select Commodities - Performance & BMI Forecasts
63
Competitive Landscape
65
Table: South Africa - Largest Mining Companies' Financial Data
66
Company Profile
68
Global Company Strategy - Anglo American - Q2 2015
68
Company Strategy
70
Latest Results
71
Table: Anglo American - Financial Data
72
Global Company Strategy - AngloGold Ashanti
73
Overview
74
Strategy
75
Risks
76
Latest Results
77
Table: AngloGold Ashanti - Key Financial Data
77
Impala Platinum
78
Table: Impala Platinum - Key Financial Data
82
Regional Overview
83
Regional Overview - Four Key Themes For 2015: Africa Mining
83
Gold To Retreat; Except In The DRC
83
West African Iron Ore On The Rocks
84
Job Cuts & Greater Mechanisation
85
Mining To Remain A Crucial Contributor To African GDP
86
Global Industry Overview
88
Global Overview
88
2
91
3
92
5
96
Methodology
98
Industry Forecast Methodology
98
Sources
99
Risk/Reward Index Methodology
100
Table: Weighting Of Indicators
101

The South Africa Mining Report has been researched at source and features Business Monitor International (BMI)'s mining and commodity forecasts for metals, minerals and gems, covering all major indicators including reserves, production, exports and values. The report also analyses trends and prospects, national and multinational companies and changes in the regulatory environment.

BMI's South Africa Mining Report provides industry strategists, service companies, company analysts and consultants, government departments, trade associations and regulatory bodies with BMI's independent forecasts and competitive intelligence on the mining industry in South Africa.

Key Benefits

  • Use BMI's independent industry forecasts on South Africa to test other views - a key input for successful budgeting and planning in this mining market.
  • Target business opportunities and risks in South Africa's mining sector through our reviews of latest mining industry trends, regulatory changes and major deals, projects and investments in South Africa.
  • Assess the activities, strategy and market position of your competitors, partners and clients via our Company Profiles (inc. KPIs and latest activity), Key Projects Tables and Competitive Landscape Tables.

Coverage

BMI Industry View

Summary of BMI’s key forecasts and industry analysis, covering mining reserves, supply, demand and prices, plus analysis of landmark company developments and key changes in the regulatory environment.

Industry SWOT analysis

Analysis of the major Strengths, Weaknesses, Opportunities and Threats within the mining sector and within the broader political, economic and business environment.

BMI Industry Forecasts

Historic data series (2009-2013) and forecasts to end-2019 for key industry and economic indicators, supported by explicit assumptions, plus analysis of key risks to the main forecasts. Indicators include:

  • Mining industry: Industry size (USDmn), real growth (%), % of GDP, employment (‘000), workforce as % of total workforce, average wage (USD).
  • Output: Production volumes (‘000 tonnes, carats etc.) for all major metals, minerals, ores and gems mined in each state, including bauxite, copper, gold, coal, lead, silver, tin, titanium, uranium, zinc etc.
  • Exports: Value of exports (USDmn) for all major metals, minerals, ores and gems mined in each state.
  • Commodity markets: Global demand, supply, stocks and benchmark prices (USD) for aluminium, copper, lead, nickel, tin, zinc, gold and steel.

BMI’s Mining Risk Reward Index

BMI’s Risk Reward Indices provide investors (mining companies and support service providers) looking for opportunities in the region with a clear country-comparative assessment of a market’s risks and potential rewards. Each of the country markets are scored using a sophisticated model that includes more than 40 industry, economic and demographic data points to provide indices of highest to lowest appeal to investors, with each position explained.

Competitive Landscape Tables & Analysis

Comparative company analyses and tables detailing USD sales, % share of total sales, number of employees, year established, market cap/NAV, ownership structure, production and % market share.

Key Projects

Details and analysis of all current and planned developments (new ventures, capacity expansion and other investments) across the sector broken down by metal/ore.

Company Profiles*

Examines the competitive positioning and short- to medium-term business strategies of key industry players. Strategy is examined within the context of BMI’s industry forecasts, our macroeconomic views and our understanding of the wider competitive landscape. The latest financial and operating statistics and key company developments are also incorporated within the company profiles, enabling a full evaluation of recent company performance and future growth prospects.

Sources

The Mining reports are based on an extensive network of primary sources, such as multilateral organisations (UN, WB, IMF), national chambers of commerce and industry, national statistical offices, government ministries and central banks, and multinational companies.

*Company profiles are not available for every country. Those reports instead contain information on the current activities of prominent companies operating in the market.

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Testimonials

'An essential, multi-faceted research tool. BMI’s thorough understanding of the major market players enables an informed – and informative – review of the sector’s actual performance, together with useful insights into current industry issues, which are topped-off with detailed and invaluable forecasts of industry and macroeconomic trends.’

Senior Research Analyst, ABC International Bank plc