South Africa Mining Report

Providing expert analysis, independent forecasts and competitive intelligence on the mining.

Report includes: BMI Industry View, Industry SWOT Analysis, Industry Forecasts, BMI's Petrochemicals Risk Reward Index, Economic Forecasts, Company Profiles and Global, Regional and Country Industry Overviews.

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South Africa Mining Report
Product Price
$1,295.00

BMI View: South Africa's mining sector will face persistent headwinds due to labour unrest, mineral price weaknes s, further divestments and retrenchment.

South Africa Mining Industry Value Forecast
2014e 2015e 2016f 2017f 2018f 2019f 2020f
e/f = BMI estimate/forecast. Source: BMI Calculation/UN Data
Mining Industry Value, USDbn 32.65 32.78 30.41 29.95 30.25 31.07 9.10
Mining Industry Value, USDbn, % y-o-y 0.90 0.40 -7.23 -1.51 1.00 2.71 -70.71

Latest Updates And Structural Trends

  • On December 8 2015, Anglo American announced a restructuring plan that will focus on divestment of non-core and loss-making assets, downsizing its workforce and consolidating business divisions in an effort to weather ongoing commodity price weakness. South Africa's coal industry will be significantly hit by Anglo's restructuring plans as the firm accounts for nearly 21.5% of the country's total thermal coal production. Furthermore, Anglo's plans to cut employment will hit the sector as well, as Anglo employs over 24,500 in their thermal coal operations, while the firm's total employment within South Africa totals 72,000.

  • As Anglo American is keen to offload the majority of its South-African assets, this could result in a significant decline in the country's coal production growth. As such, we revised down our 2016 and 2017 coal production forecast from 1.3% to -4.0% and 1.0% to -1.5%, respectively. Despite this, South Africa, which is Sub-Saharan Africa (SSA)'s largest coal producer, with a 94.6% share of regional coal production in 2015, will remain the region's largest coal producer. We forecast South Africa's coal production to grow from 252million tonnes (mnt) in 2016 to 264mnt in 2019. This would represent average annual growth of 0.1% during 2016-2019, slightly higher than the average 0.9% decline during 2010-2014.

  • Weak minerals 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 South Africa's gold sector to lose market share, as miners will shift investment to low-cost, high-resource opportunities in the rest of the continent, such as in the Democratic Republic of the Congo.

  • We have revised down our 2015, 2016 and 2017 gold production forecast for South Africa from -5.0% to -9.0%, 0.8% to -1.5% and 0.1% to -1.0% as both weak gold prices and ongoing wage negotiations will continue to hurt the sector's growth output. Beyond 2015, we forecast output to average annual growth of 0.2% during 2016-2019, with output totalling 4.85moz by 2019.

  • South Africa's iron ore production growth will slow as weak iron ore prices will force miners to cut capital expenditure (capex) and halt new projects from coming online. Further, as Anglo American is keen to offload the majority of its South-African assets, this could result in a significant decline in the country's iron ore production growth. As such, we revised down our 2015, 2016 and 2017 iron ore production forecast from 1.0% to -2.0% and 0.8% to -1.5% and 1.0% to -1.5%, respectively. We forecast output to stagnate and total 76.2mnt by 2020, slightly lower than 76.4mnt in 2015. This is significantly slower than average annual growth during 2010-2014, in which output grew from 58.7mnt in 2010 to 78.0mnt in 2014, averaging annual growth of 7.2% during 2010-2014.

  • We have revised down our production growth forecast for South Africa's platinum sector. In our view, the country's platinum production will decline from 3.97 million ounces (moz) in 2016 to 3.66moz in 2019. This would represent an average annual contraction of 2.0% during 2016-2019, following an average annual decline of 4.5% over 2010-2014. Although we expect South Africa's platinum production to grow 8.2% y-o-y in 2015, this is primarily due to production recovering following a 16.0% decline in 2014, resulting from a five-month strike at Lonmin's Marikana mine.

  • Continued palladium price weakness will dent the sector's growth outlook. We expect Anglo American to scale down operations as the company has stated that it will halt production at three of its shafts at the Rustenburg complex and divest its Union mine. South Africa's palladium sector is dominated by Anglo American, which accounts for over 50% of the country's palladium output. The divestment will have a significant impact on both platinum and palladium's growth outlook over the coming years.

BMI Industry View
7
Table: South Africa Mining Industry Value Forecast (2014-2019)
7
Latest Updates And Structural Trends
7
SWOT
9
Industry Forecast
11
Coal: Modest Growth, Despite Headwinds
11
Latest Updates
11
Table: Coal Production Forecast (South Africa 2014-2019)
11
Structural Trends
12
Table: South Africa - Major Coal Projects & Expansions
16
Gold: Growth To Grind To A Halt
19
Latest Updates
19
Table: Gold Production Forecast (South Africa 2011-2019)
19
Structural Trends
21
Iron Ore: Weak Prices To Curb Growth
25
Latest Updates
25
Table: Iron Ore Production Forecast (South Africa 2014-2019)
25
Table: South Africa - Major New Iron Ore Projects & Expansions
26
Structural Trends
26
Platinum: Production Downturn Due To Rising Costs
28
Latest Updates
28
Table: South Africa - Platinum Mine Production & Growth (2014-2019)
28
Structural Trends
28
Palladium: Weak Pipeline And Unrest To Dent Growth
34
Latest Updates
34
Table: Palladium Production (South Africa 2013-2019)
34
Table: South Africa - Palladium Projects
34
Structural Trends
35
Industry Risk Reward Index
37
South Africa Risk/Reward Index
37
Rewards
37
Risks
37
Africa: Headwinds To Slow Growth
38
Key Takeaways:
38
Latest Revisions:
39
Table: Africa - Mining Risk/Reward Index
40
Regulatory Development
41
Trade & Investment Risk Analysis
41
South Africa: Mining Unrest Crib Sheet
44
Core View
44
Latest Developments
45
Key Questions & Answers
46
Commodities Outlook
52
Table: BMI Commodities Price Forecasts
52
Competitive Landscape
53
Table: South Africa - Largest Mining Companies' Financial Data, 2014
54
Company Profile
55
Global Company Strategy - AngloGold Ashanti - Q4 2015
55
Overview
57
Strategy
57
Risks
58
Latest Results
59
Table: AngloGold Ashanti - Key Financial Data
60
Global Company Strategy - Anglo American - Q4 2015
61
Company Strategy
63
Latest Results
64
Table: Anglo American - Financial Data
65
Global Company Strategy - Impala Platinum - Q4 2015
66
Table: Impala Platinum - Key Financial Data
70
Regional Overview
71
Africa Mining: The Four Key Themes
71
Key Themes
71
SSA Gold: Stagnation, But DRC To Shine Bright
71
Iron Ore Price Weakness To Curb Growth
72
Regulatory Uncertainty To Curb Growth
73
Mining To Remain Key Contributor To GDP
74
Methodology
76
Industry Forecast Methodology
76
Sources
77
Risk/Reward Index Methodology
78
Table: Weighting Of Indicators
79

The South Africa Mining Report has been researched at source and features BMI Research'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.