JOHANNESBURG – South
African mining companies are bracing for a heavy hit from the country’s looming
nationwide lockdown to slow the spread of the coronavirus, warning of an
expected leap in costs in addition to their lost output.
A leading producer of metals and minerals such as platinum, palladium, coal,
gold and iron ore, South Africa’s labor-intensive mining industry is a
potential hotbed of infection among the thousands of miners who often work in
confined spaces, with some living nearby in cramped accommodation.
President Cyril Ramaphosa on Monday imposed a 21-day lockdown from midnight on
Thursday after a surge in coronavirus cases.
Furnaces and underground mines will have to be put on care and maintenance,
which means operations would stop but are kept in a condition to reopen in
future.
“The lockdown could result in some major capital expenditure to reopen
certain deep-level shafts,” said SP Angel mining analyst Johan Meyer.
South Africa’s Minerals Council said it was exploring what would be required to
prevent permanent damage of the sector.
“There are marginal and loss-making mines that would likely be unable to
reopen should they be required to close fully, without remedial measures,”
it said.
AngloGold Ashanti, owner of Mponeng – the world’s deepest mine – said it was
developing plans to restore production safely. The gold miner has already
suspended production at its Cerro Vanguardia mine in Argentina.
Pan African Resources said it has sufficient liquidity but would look to
reschedule its short-term senior debt obligations in the event the lockdown
extends into a prolonged period.
Production Hit
Gold Fields said that it expected a loss of around 16,000 ounces during the
21-day lockdown based on the current run-rate at its South Deep mine in South
Africa.
The bullion miner said its Cerro Corona operations in Peru have been under a
15-day curfew since March 16, while its Chile operations were placed on a
three-month curfew from March 19, while project activities at Salares Norte
were continuing with construction only set to begin later this year.
“We have sufficient liquidity to withstand an interruption to our operations
for a considerable period of time, but will work towards minimizing the impact
of Covid-19 on our operations,” Gold Fields said in a statement,
It added that the company has $600 million in cash and in excess of $1.5
billion of unutilized debt facilities.
Harmony Gold said the shutdown would “negatively impact” its annual
production guidance of 1.4 million ounces and its full-year earnings.
“This is an unprecedented time in the history of the mining industry and
our country,” said Chief Executive Peter Steenkamp.
South32 also said it would withdraw its full-year guidance for South African
operations, which include thermal coal, aluminum, manganese and a smelter.
Impala Platinum said it planning an orderly transition to care-and-maintenance
status at its mining, smelting and refining operations while also working on an
analysis of the impact.
“These are unprecedented and extraordinary times and we all need to make
sacrifices for the greater good,” said Impala CEO Nico Muller.
Sibanye Stillwater, the world’s largest primary producer of platinum, and Anglo
American Platinum said they would comply with government measures but could not
comment further at this stage.
While miners try to quantify the financial impact from the crisis, South
Africa’s mining minister was to meet mining and energy executives on Tuesday to
consider how to execute the lockdown.
Palladium prices surged as much as 12.7% on Tuesday for the biggest daily gain
since 2000, spurred partly by concerns over supply. Spot gold and platinum also
rose sharply.
Source: Voice of America