The South African Mining Industry

ANGLOVAAL MINING LIMITEDCEO’s evening : 2 November 2000

ANGLOVAAL MINING LIMITEDCEO’s evening : 2 November 2000

• Exceptional geological deposits

• Political transition after 1990

• Modernise the industry

• Result: leaner, more focused, more competitive and internationally active industry

• Major transformation challenge remains

MINING IN SOUTH AFRICA

• Continues to be a highly successful cluster in South African economy

• Most major minerals have experienced long-term growth • Mining is a significant contributor to employment creation,

rural economies and regional (SADC) development

• Hidden inside SA’s aggregate mining statistics are large, expanding industries

• Production: coal, PGMs and chrome sectors have doubled in size since 1980

• During the same period, mining other than gold, grew faster than the rest of the economy

• World-class support industries (electricity, chemical, engineering)

MINING INSOUTH AFRICA

Large, expanding industries

MINING IN SOUTH AFRICA

0 10% 20% 30% 40% 50% 60% 70% 80%

Phosphate rock

Zinc

Iron ore

Nickel

Coal

Antimony

Uranium

Fluorspar

Zirconium minerals

Vermicullte

Titanium minerals

Alumino-silicates

Gold

Vanadium

PGMs

Chrome ore

Manganese

Reserves

Production

South African reserves and production in key minerals 1998 (% of world)

Source: Chamber of Mines

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• Mining and related beneficiation accounts for over half of

SA’s exports

• Mining remains the most important earner of foreign exchange

• Growth in manufacturing exports is based on mining activities

MINING INSOUTH AFRICA

60% of South Africa’s exports

Beneficiation process % of productionbeneficiated

% of exportsbeneficiated

Antimony concentrate to antimony troxide 65 80

Chrome ore to chromium alloys 57 71

Copper concentrate to copper metal 92 89

Iron ore to iron and steel 30 15

Manganese ore to manganese metal and 49 43alloys

Nickel matte to nickel metal and sulphate 100 100

Phosphate concentrate to phosphoric acidand phosphatic fertilisers

52 37

Zinc concentrate to zinc metal 100 100

MINING IN SOUTH AFRICAExtent of beneficiation

Diamond sorting/valuing to cutting/polishing 100 52

Composition by sector ofSouth African export earnings

Sector Average for decade1970s 1980s 1990s

Agriculture & forestry 6,9% 3,5% 4,2%Mining 54,0% 61,3% 40,9%Manufacturing 24,6% 23,6% 40,3%Electricity, gas & water 0,1% 0,1% 0,1%Services 14,4% 11,5% 14,3%

MINING IN SOUTH AFRICA

MINING INSOUTH AFRICA

Export destinations for SA’sprocessed minerals

Source: Minerals Bureau

Europe38%

Pacific Rim Countries

25.8%

MiddleEast 4.8%

North and Central America

28%

South America2.5%

Africa 1%

Percentage contribution to GDP by sector:1975 - 1998

Sector 1975 1980 1985 1990 1995 1998

Agriculture, forestry & fishing 5,4 5,7 5,4 6,1 5,3 6,4Total mining 13,9 13,3 13,0 11,3 10,5 9,9Total manufacturing 30,1 32,8 29,4 29,6 29,3 28,3Electricity, gas & water 3,1 3,6 4,6 5,1 5,6 5,9Building & construction 6,3 5,0 4,4 4,0 3,4 3,3Services 41,1 39,6 43,2 43,9 45,9 46,3

MINING IN SOUTH AFRICA

• Mining / manufacturing is inter-related

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Contribution to mining GDP, 1998

Source: SA Reserve Bank

Coal21%

GoldGold45%45%

Diamonds7%

PGMs27%

• Gross fixed capital formation continues to be significant

• Large portion of capital investment in SA over past decade has been into the minerals complex (Alusaf, Columbus, RBM, Saldanha Steel, Sasol, etc)

• For five million South Africans, mining is the principal ally against poverty

• Latest census - one in seven men with a formal sector job in 1996 employed in mining industry

• Mining industry is the conduit for money and opportunity to some of the poorest areas in Southern Africa

MINING INSOUTH AFRICA

Principal ally against poverty

• 1996 population census - more than one sixth of the

aggregate income of wage earners is derived from mining in 56 magisterial districts

• These 56 districts are SA’s “mining nation”

• These areas include poor rural districts from which mine workers are recruited.

• Total population of these areas is 5,7 million: on average, more than a quarter of all income earned by men is earned from mining

MINING INSOUTH AFRICA

Principal ally against poverty

Principal ally against poverty

MINING IN SOUTH AFRICA

Per cent of all i ncome

Less than 4 %4% to 8 %8% to 16 %16 % to 32%More than 32 % 400 0 400 800 Kilometers

Kriel

Rustenburg

OberholzerJohannesburg

Proportion of workers at various formal education levels

MINING IN SOUTH AFRICA

Source: Chamber of Mines

New mine workers

85 90 95 98

Matric

Less than primary

30%

20%

10%

0%

MINING IN SOUTH AFRICAEmployees on Chamber of Mines gold mines

Source: Chamber of Mines

95,000

90,000

85,000

80,000

75,000

20,000

15,000

10,000

5,000

0

1970 1980 1990 1998

Unskilled wages

Skilled wages

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ages

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Contribution of direct taxes to the government revenue (per cent of total revenue)

Sector 1970s Average

1980sAverage

1990sAverage

Coal 0,29 0,52 0,60*Gold & uranium 10,02 12,51 1,13Diamonds 1,45 0,56 0,09

MINING IN SOUTH AFRICA

* 1990’s figure includes coal and other mining

• Over last 20 years, two major economic shortcomings

have forced African economies to depend on multilateral aid agencies:

1. Owing to inability of governments to generate tax revenues, African countries have saved at less than half the rate of other developing countries.

cont….

MINING INSOUTHern AFRICA

Key to economic development

2. With limited exports, less foreign exchange to

purchase machines and computers required for export-led growth.

• Root cause of this: political instability, weak institutions, poor policies

• Mining can play a critical role in Africa’s economic renaissance

MINING INSOUTHern AFRICA

Key to economic development

South Africa

BotswanaBotswana

Namibia

Tanzania

Zambia

Zimbabwe

Moz

ambi

que

Key to economic development

in southern Africa

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Recent mining FDI* in selected SADC countries 1995 - 1999 (US$ millions)

Country 1998 1995 – 1999Totals

Mozambique 8 20Namibia 10 59Tanzania 48 297Zambia 162 405Botswana 250 400Zimbabwe 544 577Totals 1 022 1 758

MINING IN SOUTHern AFRICA

Source: Business Map/SACS - FDI database FDI : Foreign direct investment

• SA mining companies are leading the resurgence of mining activity in the region

• Extensive African exploration is underway

• Johannesburg may reclaim position as global centre of mining technology, specialist services and supplies

• It is estimated that half of investment made in large-scale projects in southern Africa is returned to SA through purchase of services and supplies

MINING INSOUTHern AFRICA

South Africa is well positioned

• SA provides sophisticated inputs and services to the global mining industry

• SA firms have become globally prominent in three areas:

1. Technology providers

2. Providers of knowledge- based mining services

3. Specialist mining contractors

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South African firms are at the centre...

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• The contribution of mining to the economy must be seen as coming not only from mining operations, but also from upstream and downstream activities and the huge multiplier effects the industry has at economic, social and political levels

• Mining represents the most successful “cluster” in SA’s economy

Conclusion / looking forward