Download This is the Mining Industry “Long Cold winters and Short beautiful

This is the Mining Industry
“Long Cold winters and Short beautiful summers”
Delivered by: Mr. Mike Teke
4 October 2013
Today’s conversation…
This too will Pass!
The Global Mining space
The State of South African Mining
The Impact of recent Labour Issues
How do we stabilise the industry?
PWC Annual Mining Report Titles
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•
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•
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2005 “Enter the Dragon”
2007 “Riding the wave”
2008 “as good as it gets”
2009 “When the going gets tough”
2010 “Back to the Boom”
2011 “The game has changed”
2012 “The Growing Disconnect”
2013 “A Confidence Crisis”
“This Too will Pass!”
Today’s conversation…
This too will Pass!
The Global Mining space
The State of South African Mining
The Impact of recent Labour Issues
How do we stabilise the industry
Shifting Risks in the Global Mining Space
2008
2013
2014
1.
Skills shortage
1.
Resource nationalism
1.Capital allocation and access
2.
Industry consolidation
2.
Skills shortage
2. Margin Protection and productivity
improvements
3.
Infrastructure access
3.
Infrastructure access
4.
Maintaining a social license to
operate
4.
Cost inflation
5.
Capital project execution
6.
Maintaining a social license to
operate
5.
Climate change concerns
6.
Rising costs (cost inflation)
7.
Pipeline shrinkage
7.
Price and currency volatility
8.
Resource nationalism
8.
Capital management & access
9.
Access to secure energy
9.
Sharing the benefits
10.
Increased regulation
10.
Fraud and corruption
3.Resource Nationalism
4.Social Licence to operate
5.Skills shortage
6.Price and currency Volatility
7.Capital project execution
8.Sharing the benefits
9. Infrastructure access
10.Threats of substitutes
Source: “Business Risks Facing Mining and Metals, 2012-2013 and 2013/2014 Ernest & Young
Changing World markets….
Since 2008, the global commodities markets have
been hit by the multiple effects of :
•
•
•
•
•
•
The slide into recession in Europe due to the sovereign debt crisis (a critically important market for
platinum),
The slowdown in economic growth in China (from >10%p.a. in 2008 to 7.7% now),
The continued below potential growth performance of the US economy,
The global sovereign debt crisis (especially in developed markets – EU, USA, Japan),
The impact of quantitative easing (low interest rates and printing money) on commodity prices,
The recent drying up of liquidity towards mining projects (concern that quantitative easing is not working
and the slower growth levels).
Source: Chamber of Mines
 Rising urbanisation, 3 billion people to
urbanise by 2050 (most of the growth in
Africa)
World urban population growth (Billion people)
7.5
7.0
0.5
6.5
0.8
6.0
0.5
5.5
0.5
5.0
0.4
4.5
4.0
3.5
3.0
2010 Urban Pop.
Source: UN, McKinsey
China
India
Other Asia
Africa
RoW
2050 Urban Pop.
 The Global Mining Space
Top 6 minerals, expected greenfield production growth for the
period 2011-2020
Citibank - growth projects by commodity on a
production volume basis, 2011-2020
Nickel, 11
Uranium, 1
Copper, 27
Coking coal,
11
Gold, 15
Iron ore, 21
Thermal coal,
16
Source: CitiBank
 The Fraser Institute
Vision:
•
A free and prosperous world where individuals benefit from the
operator choice , competitive markets, and personal responsibility.
Mission:
•
To measure, study, and communicate the impact of competitive markets
and government interventions on the welfare of individuals.
•
•
South Africa has fallen down the rankings – 54/93 in 2012 to 64/96 in 2013.
Based on existing regulations and practice, S.A. is ranked 77 out of 96 countries in 2013 from
62/93 in 2012.
Comments;
1. Canada
Canadian mining regulation and legislation are generally easy to operate under
- A producer company with more than US$50M, Company president
2. Alberta
Strong mining province, open for business.
- An exploration company, Company president
3. New South Wales
Stable, not corrupt, has technical potential, skilled labour force, not too green, and sensitive to how mining assist remote
development and usefulness of royalties. Pro-mining conservative government.
- A consulting company, Company president
Continued…
4. Australia in general
Across Australia, political and regulatory panic is seriously impacting the quality and timeliness of decisions, and
certainty about access to land is very concerning. The “Twitter” factor is determining political attitudes and actions,
and regulators are reacting to minimize the perceived “risk exposure” of their ministers.
- A consulting company, Company president
5. Botswana
Can get work done. Reasonable approval process. Not excessive regulations. Clearly pro-mining culture. Honest
civil servants
- A producer company with more that US$ 50M, Manager
6. South Africa
Strikes, demonstrations, military killing workers.
- An exploration company, Vice- president
Country with an unworkable political structure
- An exploration company , Company president
7. South Africa & Zimbabwe
Both South Africa and Zimbabwe are driving social experiments not driven by logic and economy, but by ideology. In the
absence of reason, primary industries become the cash cows to fund the un-fundable. The rise of oligarchs in both countries
evidences decline.
- An exploration company, Vice-president
Source: Fraser Institute 2012/13
Today’s conversation…
This too will Pass!
The Global Mining space
The State of South African Mining
The Impact of recent Labour Issues
How do we stabilise the industry?
The South African Mining Industry
SA’s Mineral Value: 6 main commodities
PGM’s:
Manganese:
8.8MT produced in 2012,
accounted for >20% of
global production, 8646
employees.
254.3T produced in 2012,
with Pt. accounting for
128.6T. #1 producer in the
world, 2nd largest mineral
export, 199215 employees.
Diamonds:
7 million on carats
produced in 2012,
accounted for 12% of
global production, 12081
employees
Source: Chamber of Mines
Gold:
167.2T produced in 2012,
accounted for 6% of global
production, ranked 6th
largest in the world,
largest component of
mineral exports, 142193
employees.
Iron Ore:
Coal:
258.6MT produced in 2012,
largest part of mineral
sales, 3rd largest
component of mineral
exports, 83245 employees.
67 MT produced in 2012,
4th largest component of
mineral exports, 23368
employees.
South Africa has significant geological potential
South Africa, is not mature mining real estate! The country still has
significant geological potential
South African reserves for key minerals, 2008
Global rank
1
1
1
1
1
2
2
2
2
2
4
4
5
5
6
8
8
8
9
0
PGM's
Manganese
Chromium
Gold
Alumino-Silicates
Vermiculite
Vanadium
Zirconium Minerals
Titanium minerals
Fluorspar
Antimony
Phosphate rock
Nickel
Uranium
Lead
Coal
Zinc
Silicon
Iron ore
Source: DMR/USGS
10
20
30
40
50
60
% of global
70
80
90
100
.
Perceptions and realities about mining
PERCEPTION
REALITY
Is a “Dirt Digger”
Another R300 billion and 150 000 jobs created in
downstream industries
Is uncaring about the lives of workers and does not pay well
67% reduction in fatality rate, average wages per employee
up 12% p.a.
Does not care about the environment, communities –Poverty
at the doorstep of prosperous mines
Spent R1.4 billion on communities, R4 billion on skills and
R25.8 billion in corporate taxes in 2011.
Profits and benefits exported to a small bunch of Capitalists
Shareholders balanced 50% local, 50% offshore, R12 billion
in dividends
Resistant to Transformation
>R150 billion in BEE deals concluded, good progress on all
pillars of Charter
Does not matter to SA- Ingi Saldago- Business Report”Eskom was right to switch off the Mines”
19% of GDP, 50% of exports, 1.3 million jobs, 94% of
electricity, 17.2% of corporate tax
Source: Chamber of Mines
The recent negative news items have resulted in an
underperforming mining index on the JSE
Unfortunately, mining has been the worst performing sector of the
SA economy over the past two decades
South Africa: Trends in real GDP (real 2005 rand terms) per sector,
base indexed to 1993 (source: StatsSA)
Agriculture, forestry and fishing
260
240
index 1993=100
220
Mining and quarrying
Manu-facturing
Electricity, gas and water
200
Construction
180
160
Wholesale & retail trade; hotels &
restaurants
Transport, storage & communication
140
120
Finance, real estate & business
services
General government services
100
Personal services
80
Overall GDP
 Health and Safety is Key
 Zero Harm is still the Goal
 Section 54s
17
Fatalities in the RSA mining industry
700
600
Fatalities
500
2003- 270
2011- 123
2012- 112
2013- 67 to date…
400
300
200
100
0
1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Today’s conversation…
This too will Pass!
The Global Mining space
The State of South African Mining
The Impact of recent Labour Issues
How do we stabilise the industry?
Confluence of factors have served to complicate the
labour market situation
Rapid urbanisation
(fastest in Africa, people
seeking jobs in platinum
belt)
Inter-union rivalry
Political opportunists
seeking to capitalise on the
situation
Workers battle
garnishing orders and
too much exposure to
micro credit
Labour unrest
Perception that mines are
not doing enough to help
local communities
High unemployment rates
(26.2% versus national
average of 24.9%)
Source: Chamber of Mines
Perception that mining
companies can pay
much higher wages
Poor service delivery by
municipalities, insufficient bulk
infrastructure, land for
settlement
High poverty rates
Increasing levels of protest
against poor service delivery
(average 8.8 protests per
month in RSA)
Elephants in the Room…
• AMCU is here…
• Conditions of service, Garnishee orders, Migrant Labour etc
• MPRDA Amendment Bill….
• Safety, Costs and Productivity(Work Ethic)…
• Transformation… May 2014?
Source: Chamber of Mines
Today’s conversation…
This too will Pass!
The Global Mining space
The State of South African Mining
The Impact of recent Labour Issues
How do we stabilise the industry?
How do we stabilise the industry?
•
Acknowledgement that the Game has changed in the Labour front…
• Begin to engage on Productivity(Work Ethic) and Growth matters…
• Accelerate on economic Growth enablers like skills development,
investment , infrastructure development etc…
• Eradication of Negative Messages about our Country!
• Accelerate delivery on the Transformation agenda- This is about Hope!
• This Too will Pass!
Putting South Africa First…