Report shows positive growth in the mining and manufacturing industry as both sectors&nbsp; show slight figures of recovery in third quarter



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South Africa’s mining and manufacturing industry shows slight growth in production and sales, but could decline in the near future. 



The October 2018, StatsSA report shows both sectors have had figures of recovery from the start of the first quarter. 



The mining production overturned a three-month decline with a 0,5% year-on-year growth in the third quarter, with gold being the lowest contributor. 



Senior economist, Elize Kruger from NKC African economics, says despite&nbsp; growth in the mining sector there is nothing to be excited about.



Protest action that started on gold mines in mid-November added to the pressure that the sector has been under over the past months. 



A protected wage strike at Sibanye-Stillwater&#8217;s gold operations started when The Association of Mineworkers &amp; Construction Union (AMCU) made a demand of &nbsp;R1,000 annual increases in wages for mine workers. 



The National Union of Mineworkers, Solidarity and United Association of SouthAfrica on&nbsp; the other hand accepted R700 in the first two years and R825 in the third for most of their members. 



The Johanessburg based mine urged striking workers to return to work by December 15, 2018.&nbsp; 



“Novemember and December could be impacted by the strike action that we see in the gold mining industry. The fourth quarter data is likely to remain depressed despite the October numbers,” she says. 



Gold is the largest negative contributor at -15,1% thus contributing -2,3%percentage points to the overall figures. 



Furthermore, increases in electricity prices that will take effect early 2019, will tighten the pressure on the industry adding to headwins faced on a global scale. 



“Alluminum sector is impacted by the US import tarrifs increases and the threat of electricity price increases in the order of 15% ,” says Kruger. 



The 15% increase is a strategy put in place by the electricity public utility,&nbsp;Eskom, to settle financial constraints. 



The request made to the National Energy Regulator of South&nbsp; Africa will be effective for three years if approved. 



The manufacturing industry grew by 3,0% with eight out of 10 sectors showing positive growth rates over the last three months. 



According to Kruger, the strong levels of the rand exchange rate put in a helping hand in the manufacturing production and sales sector.

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South Africa’s mining and manufacturing sectors show slight growth

Can mines become more efficient – and safe – through tech? Robots, drones and virtual reality tools are now being used for sophisticated drilling operations.

The mining industry has been pivotal to the economy of South Africa for many years, but the current climate is tough.
Investor confidence in the sector is waning, with the country’s mines struggling in the face of a declining economy and regulatory uncertainty. The industry used to contribute almost a fifth of the country’s GDP, but this contribution has been declining by about 0.2% per year.
In the meantime, input costs are rising, with the end result being an almost 50% decline in investor profits, while dividends have fallen by more than half. As a result, employment has fallen. In the gold mining sector, for example, almost 50,000 jobs have been lost since 2009. In a bid to make the sector more efficient and increase margins, mining firms are turning to tech.
The old technologies – pneumatic drills and the like – being employed by individual miners are slowly being phased out. Robots, drones and virtual reality are the new order of the day.
At Kumba Iron Ore, one of the largest producers of iron ore globally, drilling is going high-tech. Whereas miners used to sit for up to eight hours at a time on a truck-sized machine, drilling holes in which to place explosives, now they can do it from the comfort of an office. Kumba is one of only two iron ore mining firms globally to have started using autonomous drills.
<a href="http://www.forbesafrica.com/focus/2018/04/17/mining-charter-back-square-26/" target="_blank" rel="noopener">READ MORE: Mining Charter Back To Square 26</a>
The decision to use this drill was a response to the volatility of the commodities market. Investing in tech, the company believed, would make its operations more efficient.
Between 2014 and 2017, Kumba has spent R748 million (about $52.5 million) on the implementation of new technologies.
Drones took flight over its Kolomela mine in South Africa’s Northern Cape province in December 2015, and Kumba now has a fleet of 10. Fitted with state-of-the-art cameras and laser scanners, they have taken over drilling operations, as well as providing up-to-date, real-time data on the mine’s operations. Surveyors are safer as they do not need to physically visit sites.
“The technology projects are aimed at creating safer work environments by removing people from harmful environments, improving productivity through the implementation of real time, efficient solutions that results in driving down costs and maximizing the utilization of current and future resources in order to remain competitive in the long-term through the development of low-grade beneficiation technology,” says Bongi Ntsoelengoe, Technology Manager at Kumba Iron Ore.
The results have been impressive, with Kumba’s productivity rising dramatically. Operating hours are up by 20%, according to Ntsoelengoe, while drill hole quality has improved and the company will need fewer drilling machines over the mine’s lifetime. Not only have efficiencies and production improved, driving down operating costs, the mines are also safer.
<div id="attachment_37243" style="width: 245px" class="wp-caption aligncenter"><img aria-describedby="caption-attachment-37243" decoding="async" loading="lazy" class="size-medium wp-image-37243" src="https://www.forbesafrica.com/wp-content/uploads/2018/09/IMG_9689-2-Bongi-Ntsoelengwe-235x300.jpg" alt="" width="235" height="300" srcset="https://cms.forbesafrica.com/wp-content/uploads/2018/09/IMG_9689-2-Bongi-Ntsoelengwe-235x300.jpg 235w, https://cms.forbesafrica.com/wp-content/uploads/2018/09/IMG_9689-2-Bongi-Ntsoelengwe-300x384.jpg 300w, https://cms.forbesafrica.com/wp-content/uploads/2018/09/IMG_9689-2-Bongi-Ntsoelengwe-600x768.jpg 600w, https://cms.forbesafrica.com/wp-content/uploads/2018/09/IMG_9689-2-Bongi-Ntsoelengwe-768x982.jpg 768w, https://cms.forbesafrica.com/wp-content/uploads/2018/09/IMG_9689-2-Bongi-Ntsoelengwe-801x1024.jpg 801w, https://cms.forbesafrica.com/wp-content/uploads/2018/09/IMG_9689-2-Bongi-Ntsoelengwe.jpg 1601w" sizes="(max-width: 235px) 100vw, 235px" />Bongi Ntsoelengoe, Technology Manager at Kumbe Iron Ore. Photo Supplied.</div>
<blockquote>“Benchmarking studies have shown that South African mining industry has lagged behind in the adoption of technology until recently,” Ntsoelengoe said.</blockquote>
That is slowly changing. Another mining giant becoming increasingly tech-savvy is Rio Tinto, which has the largest fleet of driverless trucks in the industry.
These trucks are remotely controlled from a state-of-the-art operations center 1,500 kilometers away, and hauled one billion tonnes of ore in February alone.
Rio Tinto is also establishing the world’s first fully-autonomous heavy haul, long-distance rail network, and is the first mining company to achieve fully-automated hole pattern drilling without human intervention. Its iron ore business currently operates seven fully autonomous rigs for drilling production blast holes.
“Our Autonomous Drill System enables a single operator from a remote location to operate up to four autonomous drill rigs simultaneously. This technology is much safer for the operator and has improved both precision and equipment utilization,” says Stephen McIntosh, Rio Tinto’s Group Executive, Growth &amp; Innovation.
Meanwhile, 3D visualization technology RTV delivers real-time 3D models of ore deposits located far beneath the surface that previously couldn’t be measured.
“This enables more accurate drilling and blasting, reduced explosive use and better waste classification,” says McIntosh.
Like Kumba, Rio Tinto is also improving its data collection through tech. Its Mine Automation System (MAS) allows it to combine myriad streams of data to deliver operational insights in real-time to step up productivity performance.
“It helps give us a better understanding of what grade is where before we mine and is a powerful resource to drive productivity improvements from mine to market,” says McIntosh.
Meanwhile, the environment is also benefitting.
Rio Tinto has launched the world’s first certified low CO2 aluminium, RenewAl, and cutting-edge AP smelting technology, which reduces electricity use and lowers emissions.
“As we look to develop more mines at greater depths, we’re using technology to keep people safe – such as sensors to monitor conditions, autonomous vehicles to haul ore, and complex ventilation systems to create a comfortable working environment,” says McIntosh.
He says Rio Tinto’s early adoption of automation was across the board, helping it drive productivity, lower costs and increase safety. This was the direction in which the industry is headed, he says, with more mines likely to jump on board and invest in tech in the future. This could help pull the whole industry out of the doldrums.
“As an industry, we have achieved incredible things through scaling and ever refining known technologies,” says McIntosh.
&#8211; By Tom Jackson

Mines Coal

The Efficiency Of Mining With Drones

The new amended Mining Charter – the agreement that governs black ownership in the mines – has been a festering sore for more than four years. The employers and unions have disputed it, lawyers have argued over it and yet no one seems to be able to agree on one of the most important documents in Africa’s most lucrative industry.
Love it or loathe it, the mining industry in South Africa employed more than 450,000 people, with a trickle down that supports an estimated 4.5 million people, contributing  7.1% to GDP, in 2016. In the same year, it racked up sales of more than $30 billion. It may be a far cry from the industry’s heyday in the 1980s, when it employed a million people, but it is still too big to ignore.
Cars run on South African-mined platinum, in their catalytic convertors, from New York to Paris; around half of all the gold on the fingers and locked in the bank vaults across the world was unearthed and refined in and around Johannesburg in more than a century of mining.
<a href="http://www.forbesafrica.com/focus/2012/03/01/trouble-mining-africa/" target="_blank" rel="noopener">READ MORE: The Trouble With Mining In Africa</a>
This treasure trove of wealth is the main reason why the fight over the Mining Charter has been so intense and emotive. It is an agreement, not legislation, agreed by employers and government to foster black empowerment.
It came into force in in 2004 amid a blaze of publicity claiming the industry was going to be swiftly transformed, towards more black ownership, in a decade. Instead, when 2014 came around there was uncertainty, a lack of direction, and questions in the corridors of power whether the Mining Charter had achieved anything at all.
The mining employers fear the Mining Charter has scared off foreign investors and is part of a severe decline in this industry. In 2016, according to Statistics South Africa, the South African mining industry’s real GDP was 2.6% smaller than in 1994. The thriving financial services sector grew by 168% over the same period.
The Chamber of Mines – that represents 90% of South African mining companies – called the amendments the last nail in the coffin when they came out last year. The former mining minister Mosebenzi Zwane called the amended Mining Charter the key to changes in the industry that will benefit the black majority – for so many decades seen as mere cheap labor in the mines.
The zealots in the government – who were pushing the amendments – want radical change in mining. They see it as a pillar of the establishment in apartheid days where black sweated labor was used to create the wealth to keep the status quo.
When the amendments were released they were dramatic and controversial. An increase in black ownership from 26% to 30% with a rider that this be maintained at all times. The mining employers bridled at this clause because they argue for a “once empowered, always empowered” rule that stipulates that once they have borne the cost of transferring ownership to new black owners they are deemed to have done their job. One of the bugbears of the black empowerment game is dilution.
That is, after the lock-in period, black shareholders often cash in their stakes, which dilutes the overall black owned percentage, leaving the employers with the arduous task of starting again. If the “once empowered, always empowered” principle was upheld by the courts it would mean most of the major mining companies could claim they had done their job.
On top of this were a raft of amendments that the Chamber of Mines objected to and one or two the lawyers called illegal. Among them, a stipulation that 1% of the revenue be paid to black shareholders before any others are considered. Mining lawyers consider this to be an illegal flaw – in contravention of the Companies Act – in a Mining Charter that was rushed and poorly written.
“It is open to discretion, with very unclear rules that make it very difficult to invest with that level of uncertainty and that is the long and short of it,” says Peter Leon, mining law expert with Herbert Smith Freehills in Johannesburg. He also considers another clause about the writing off of dividends, to be repaid by black shareholders in fees for shares, to be tantamount to expropriation.
The Chamber of Mines claims the Mining Charter is unconstitutional and written without proper consultation. Its lawyers were ready to argue this in a three-day judicial review of the Mining Charter by a powerful bench of three judges, at the High Court in Pretoria, on February 9, 10 and 11.
At the eleventh hour, South Africa’s new president Cyril Ramaphosa – a mining man to his boots – made good on a promise in January at the World Economic Forum in Davos to intervene. His officials persuaded the Chamber of Mines to hold off with its legal challenge to give negotiation another chance.
It means the regulation of the industry will fall back on the previous charter, with its 26% black ownership target, that most companies had priced in and come to terms with.
Outside the court on the day was a throng of singing and dancing protestors who could prove a fly in the ointment. These were the people who live with the mines and their dust and disruption.
They had traveled for hundreds of kilometers, with their lawyers in tow, from tiny villages across South Africa to make their point in Pretoria. They wanted a seat at the negotiating table and the court ruled that they should get one.
The mining communities making their debut in the Mining Charter talks, alongside government, unions and mining employers, could add more time and dimensions to what is already likely to be a complex debate.
The Chamber of Mines has flagged this as a difficulty in negotiations. Mining companies often struggle to deal with power shifts and conflicting leadership claims in communities around mining – especially when the money starts flowing.
<a href="http://www.forbesafrica.com/focus/2018/03/12/new-kids-mining-block/" target="_blank" rel="noopener">READ MORE: New Kids On The Mining Block</a>
This puts the prediction of wrapping it all up by June, made by the new mining minister Gwede Mantashe, in severe doubt.
“We will finish it within three months, I am putting that timeframe for myself,” says Mantashe.
&#8220;A new Mining Charter that is well designed and reached through an inclusive negotiation process needs to be finalized as soon as possible,&#8221; says the Chamber of Mines in response.
In many ways, a crumb of comfort for the employers is that the new man Mantashe is also a mining man down to his boots and a world away from his disliked predecessor Zwane. Mantashe, the former leader of the biggest union in Africa, the National Union of Mineworkers (NUM), is known in the industry as an honest broker and skilled negotiator.
“You could say Gwede has mining in his blood,” says Elize Strydom, a former legal head and chief negotiator at the Chamber of Mines, who sat across the table from Mantashe in wage talks for nearly a decade.
“The good thing always was when Gwede said you had a deal, you had a deal, and you could go home and sleep soundly.”
Mantashe, who is also the chairman of the ruling African National Congress, will have his work cut out for him over the next three months to make good on his promise and sort out what is probably the most tricky and crucial set of regulations in one of Africa’s biggest economies. It is not going to be easy reconciling the wishes of a multi-million-dollar investor and a poor villager living in the shadow and dust of a mine.
Any foreign investor or any African business connected to mining will hope Mantashe does so.

Aerial view of a quarry, Johannesburg, South Africa

Mining Charter Back To Square 26

The masseuse felt the broken bones and the scars and asked Chris Cline what he did for a living. Cline said he was in the energy business. What kind of energy?, she wondered. Maybe solar panels or windmills? No, not that, he said. You’re not a fracker, are you? No, not that either. Then what? “I own coal mines,” said Cline. Without a word she stopped working on him and left the room. He waited a while, but she didn’t return. Cline won’t name the resort (“I might want to go back there”). And the scars? From his years underground in Appalachian mines, where the coal seams have been worked so thin it’s like “crawling under a table all day.” Cuts on his back from a mine’s ceiling “felt like insect bites.”
Cline, 59, is one of the most archaic and unpopular specimens of capitalist: the coal tycoon. He doesn’t mind people not liking him. He knows that coal fuels 40% of the world’s power needs. “People deserve the cheapest energy they can get,” he says. “Tell the poor in India and China that they don’t deserve to have reliable, affordable electricity.”
Coal is far from dead. Global demand has dipped because of America’s shale-gas boom and tighter regulations in China, yet it remains 50% above its level in 2000, at 7.2 billion tons per year, according to the International Energy Agency. Even factoring in a carbon tax of $30 per ton, coal can compete on price with natural gas and renewables. And Chris Cline, relying on operating efficiencies that he has honed over nearly 40 years of running his own mines, intends to be the last man standing in the industry, supplying low-cost coal from Canada to energy-hungry consumers around the world.
Cline thinks the carbon crusade is folly: “I’m all for getting sulfur and mercury and nitrogen oxide out of the air – that’s common sense,” but ultimately, he posits, “global cooling” will be a bigger threat. “I believe in our children’s lifetimes that they’ll wish they had paid us per ton to put more CO2 in the air.” (It’s easy to forget that, as recently as the 1970s, fear of a coming ice age was part of the mainstream climate conversation.) Which is why he has no qualms about having built his $2 billion fortune with a series of all-in bets that have taken him from Appalachia to Illinois and now to Canada. He created one of America’s biggest publicly traded coal miners, Foresight Energy, and two years ago sold most of his interest for nearly $1.4 billion. He’s since sunk $150 million into a new mine in Nova Scotia that may produce 500 million tons of high-dollar metallurgical coal by mid-century. And he has permits to develop 1.7 billion tons more at the Vista mine in western Canada.
“If you had any idea where I started,” Cline says wistfully. Trim, powerfully built, 5-foot-11, he speaks in a quiet growl from the back of his throat, as if accustomed to keeping his thoughts to himself. Cline’s father, Paul, was a contract miner in Beckley, West Virginia; he operated rich men’s mines in exchange for a cut of what his team pulled up. When Cline was 6, his dad paid him a penny for each little bag he filled with dirt, which would be used to pack explosives into coal seams. When their front porch collapsed, it became clear young Chris had been excavating dirt from under the house. “It taught me the importance of engineering roof supports,” he says. He first went to work underground at age 15; the miners would hide him when inspectors came. Growing up, did Cline consider himself poor? “How much more poor can you get?”
Cline’s first, battered hard hat sits above the fireplace in his mansion in Beckley. He created a lake here by damming up the hollow; it’s big enough for waterskiing and features a 400-foot waterslide. There’s also a go-kart track and a pasture, where 150-pound Italian sheepdogs keep tabs on livestock – including Fabio, a white stallion that stands at stud in a luxurious stable. Cline has four kids, now grown. His first wife died of cancer; he’s divorced from his second. For four years he dated Tiger Woods’ ex-wife, Elin Nordegren.
Cline’s gun vault holds more than 50 firearms, including a Magnum .44 and a Gatling gun. The Bureau of Alcohol, Tobacco &amp; Firearms comes out once a month to take inventory. A few years back, Cline was the subject of an extortion attempt that threatened his children. “Let ’em come,” he says with a grin. Today he’s armed with a sheaf of papers. There are architectural renderings for his island in the Bahamas and photocopies of old pics. A black-and-white shot shows a young Cline outside the little house where for fun he’d flatten bottle caps under the rails of the coal trains that ran a stone’s throw from the front door. “I’d hitch a ride on a train, hang on for a few miles, then grab one coming back.”
<a href="http://www.forbesafrica.com/focus/2018/03/12/new-kids-mining-block/" target="_blank" rel="noopener">READ MORE: New Kids On The Mining Block</a>
Cline has since upgraded his transportation. He spends 400 hours a year in the air – most of it on his $50 million Embraer Lineage 1000 – shuttling between his homes, making due-diligence tours of mines in Australia and Colombia, or hauling a Forbes camera crew to Nova Scotia, where he has been operating the Donkin mine since April. He applies the same philosophy to his planes as he does to his capital equipment: “We buy the best and run it hard.”
Underground, 1,000-horsepower mining machines rip the coal face with rotating claws; roof bolters hammer steel rods into the ceiling to hold the rock in place. Cline saw early on how much more coal he could produce with reliable equipment. Productivity and profits correlate strongly with uptime. If a vital machine breaks down and needs parts, Cline thinks nothing of sending one of his jets to fetch spares from anywhere on the continent. The math is easy: Every minute his crews are not ripping coal out of the earth equates to hundreds of dollars in lost revenue. And, yes, it’s dangerous. “It used to be brutal,” he says. “We’re trying to get all the hard work out of it.”
In 1980, when Cline was 22, his father had heart bypass surgery, and his partner offered $50,000 to buy him out. “My dad was going to do it.” But Cline had no doubt he could work harder and smarter than anyone else. “I said, ‘Why don’t we buy him out?’” And so they did, borrowing every penny. The first two weeks he worked 16-hour days and never saw sunlight – whatever it took to make his payments. With every success he doubled down. He lays on the table some pictures of himself from the 1980s – grinning, mustachioed, standing in front of an early mine named after his daughter Candice. His first big success came with Pioneer Fuel, a mine he acquired for $1 million and flipped for $17 million.
<div id="attachment_35564" style="width: 510px" class="wp-caption aligncenter"><img aria-describedby="caption-attachment-35564" decoding="async" loading="lazy" class=" wp-image-35564" src="https://www.forbesafrica.com/wp-content/uploads/2018/03/Chris-Cline-father-300x228.jpg" alt="" width="500" height="380" />Cline&#8217;s father in Appalachia (Photo by Jamel Toppin)</div>
He bought a Lamborghini and a 200-foot yacht called Mine Games, but most of the money went back into the Appalachian ground. He implemented worker-friendly innovations like air-conditioned cockpits for mining machines. And he began handing out daily bonuses in the form of dollar coins, based on how many feet of coal a team had mined that day. “A man can go home and give it to his wife. Or buy some beer,” Cline says. At year’s end he’d hand out checks to cover taxes due. “Those guys would run through a wall for him,” says Andy Fox, an independent mining engineer who first met Cline when Cline pulled up to his office in a red Porsche 928 on the way to the beach and unloaded five bags of coal he needed Fox to analyze.
Still, it’s not enough to be innovative. “You need a little luck,” Cline says. In the late 1990s he had acquired enough reserves to build six new mines. Enron was big in natural gas and wanted to diversify into coal, especially coal trading. Cline got $85 million in loans and equity from Enron to build three mines. After Enron’s 2001 collapse, he bought back the interests for $13 million, then turned around and sold a similar stake to ArcLight Capital Partners for $151 million. By 2003 he was out of Appalachian coal altogether.
The coal industry had watched intently as the EPA cracked down on emissions of acid-rain ingredients like sulfur dioxide in the early 2000s. The quickest way for many power companies to comply was to stop buying high-sulfur coal (e.g., from Illinois) in favor of low-sulfur varieties (like those from Wyoming). Panicked holders of high-sulfur reserves just let their leases lapse and walked away.
Through a new company, Foresight Energy, Cline started accumulating 3 billion tons of high-sulfur reserves in Illinois for less than 30 cents a ton, some of it from the likes of Exxon Mobil. What did Cline know that they didn’t? He believed in technology and was encouraged by power-plant innovations like scrubber systems that capture toxins before they go up the smokestack, enabling them to keep right on burning high-sulfur coal. Plus, he was used to making money on mines with seams just 3 feet thick. Those Illinois seams were 6 feet or thicker. “If it gets to where you can vertically stand up, it’s a lot more pleasant.”
“I didn’t see it as a huge risk,” Cline says. He took on private-equity capital on one condition: no second-guessing. “He didn’t want to be tinkered with,” says Bartow Jones, a partner at Riverstone Holdings, which invested $600 million between 2007 and 2008. Not only did they acquiesce, Jones says, “we insisted on it.” Cline put $2 billion into four mine complexes, which soon became the most productive underground operations in the nation, averaging 13 tons per man-hour at costs of $23 per ton with output of 20 million tons per year.
<a href="http://www.forbesafrica.com/billionaires/2018/03/09/new-billionaire-poor-immigrant-scored-4-3-billion-fortune-cable/" target="_blank" rel="noopener">READ MORE: New Billionaire: How a Poor Immigrant Scored A $4.3 Billion Fortune In Cable</a>
Cline had created a market for high-sulfur Illinois coal. “Coal is not a commodity,” Jones says. “You can’t just shove it into a pipeline like natural gas.” Cline swayed power plants to his coal by paying for their sulfur-catching upgrades out of his own pocket. He acquired docks on the Mississippi and built rail spurs to load coal from 100-car trains directly onto ships bound for India and Europe. Cline needed an exit for his investors. In early 2014 Foresight held an IPO and hit a market cap of $2.5 billion. By early 2015 Riverstone had exited, having nearly doubled its money at a time when many coal giants like Peabody Energy and Alpha Natural Resources were headed toward bankruptcy. Foresight’s relative soundness made it an attractive target for Robert Murray, a 77-year-old coal magnate whose privately held Murray Energy paid Cline a little less than $1.4 billion cash in 2015 for most of Cline’s Foresight stake. The two coal barons had been at odds for years in Illinois, blocking each other via strategic land purchases. Cline stepped down from the Foresight board of directors last March, though he still owns 2 billion tons of Illinois reserves, a slug of Foresight bonds and around 29% of Foresight shares – which have traded down 75% since the Murray deal.
In 2010, as Foresight was hitting its stride, Cline was hungry for something new. He formed a company called Gogebic Taconite that tried to get permits for a Wisconsin iron ore mine on the shores of Lake Superior. But in 2013 the plan ran afoul of the Bad River Band of the Lake Superior Tribe of Chippewa Indians, who farm wild rice in the area. Cline canceled the plans, he says, because of low iron prices. “It will be mined someday.”
Canada was more hospitable. On the day of Foresight’s IPO in 2014, Cline rang the bell on the floor of the New York Stock Exchange, then hopped on his plane and three hours later landed in Nova Scotia to go down into a mothballed mine shaft on the eastern tip of Cape Breton, in a town called Donkin. He was drawn to the huge 12-foot-thick seam and the coal’s high energy content, which at 14,000 British thermal units per ton can be readily turned into high-value coke for steelmaking.
He was also impressed that the highest-risk capital had already been sunk. The Donkin Project was a Hail Mary by the Canadian government to prop up a dying industry; it spent $50 million in the 1980s to bore twin tunnels 2 miles out under the Atlantic Ocean to tap a massive 500 million ton coal bed. By the time the shafts were cut in the late 1980s, benchmark coal prices had dropped (see chart, p. 68). When 26 miners died in a 1992 explosion at Nova Scotia’s Westray mine, it seemed like the end of the industry. But time – and higher commodity prices – heals all wounds. And Donkin was the perfect size for Cline, who bought 75% of it in late 2014 for an estimated $20 million (he’d snap up the remaining 25% the following year).
Since then, 10 of Cline’s old Foresight lieutenants have jumped to Donkin, where they’ve overseen $150 million of investments. That includes a 6,000-hp conveyor system to carry raw coal out of the mine, run it through a cleaning plant and hoist it 100 feet in the air, from which pulverized chunks drop onto jet-black pyramids. In time the conveyors will extend a half-mile to a barge-loading dock. For now front-end loaders scoop coal into trucks that carry it to Panamax-size ships at nearby Sydney. Legendary coal trader Ernie Thrasher is Cline’s partner on the logistics side. He says Donkin’s location, nearly halfway across the Atlantic, makes shipping costs to Rotterdam at least 30% ($5 per ton) less than they would be from central Appalachia. The best coking coal fetches more than $200 a ton today. The simplest way to sum up Cline, according to Thrasher: “He sees value in assets others overlook.”
<div id="attachment_35565" style="width: 510px" class="wp-caption aligncenter"><img aria-describedby="caption-attachment-35565" decoding="async" loading="lazy" class=" wp-image-35565" src="https://www.forbesafrica.com/wp-content/uploads/2018/03/Chris-Cline-300x200.jpg" alt="Chris Cline" width="500" height="333" />Cline hoped to create 200 mining jobs for distressed Nova Scotia. After layoffs, there are now only 81 at the Donkine mine (Photo by Jamel Toppin)</div>
Environmental opposition in economically depressed Nova Scotia is restrained. “Even those protesting the trucks know the coal is a good thing for the community,” says Paul Carrigan of the Port of Sydney Development Corp. “It’s in our blood.” European settlers mined the first coal here 300 years ago. Through the 1970s mining and steelmaking thrived, employing 20,000 before competition from the likes of China wiped it all out. There’s talk of using some of Donkin’s output to fuel Nova Scotia’s remaining coal plants. With plentiful wind and hydropower, Nova Scotia is well within Canada’s emissions standards.
Even First Nations peoples, like the Mi’kmaq, have been placated with jobs and a royalty on every ton. The mining jobs, paying $100,000 a year, are “an economic lifeline,” says Geoff MacLellan, a rep in the Nova Scotia legislature. But how many jobs will there be? At first, Cline had said 200. But in early November – six weeks after Forbes toured the Donkin site with Cline – the mine laid off 49 of 130 workers. Just a bump at the start of a long road, Cline says. After they did some test drilling for a few months, productivity wasn’t high enough, so they need time to bring in new equipment. Cline is patient. He has no equity partners or outside financing on Donkin. Once the mine is rocking and rolling, within 10 years it could be generating $500 million in annual revenues and putting $100 million in cash into Cline’s pocket. The reserves are vast enough to last for decades.
<a href="http://www.forbesafrica.com/focus/2018/02/28/no-fracking-way-2/" target="_blank" rel="noopener">READ MORE: No Fracking Way</a>
Is there anything that keeps Chris Cline up at night? “Sago,” he says, the name of a West Virginia mine then owned by International Coal Group where in 2006 a methane explosion killed a dozen miners. Initial reports claimed there were many survivors. Which only deepened the anguish once the bodies were found. Then in 2010 came the disaster at Massey Energy’s Upper Big Branch Mine, also in West Virginia, where 29 died. Cline had nothing to do with either incident, though over the years four workers have died in his mines, including his best friend. There are other risks. The Illinois attorney general sued and settled with Foresight for just $300,000 (plus $6.9 million in mine “retirement obligations”) over the pollution of groundwater with toxic coal slurry. Lisa Salinas, a critic of Cline who owns a farm 100 yards from an unlined slurry pond in Carlinville, thinks the settlement is a joke because it “calls for little to no valid mitigation of the existing pollution and, in fact, only encourages more damage.” A Foresight mine near Hillsboro, Illinois, has been shut since 2015 because of a dwindling coal fire.
Cline is amused by the popular misconception that coal is on its deathbed. Yes, coal-fired power plants do continue to close, and U.S. coal output, currently 700 million tons a year, is down 30% from its peak. And yet the U.S. still relies on coal for 30% of its electric power, compared with just 7% for wind and solar combined. Worldwide demand for coal continues to grow, possibly (but not definitely) peaking by the mid-2020s. Policy and technology are the wild cards; Paul McConnell at energy consultancy Wood Mackenzie figures that advances in solar and battery technology plus worldwide carbon taxes have the potential to erode coal demand by 8% a year.
But the death of coal – if it comes at all – will be long and slow. Cline aims for his next project, in Alberta, to be a survivor. He acquired the Vista project via his takeover of the Toronto-listed company Coalspur in early 2015 for an estimated $75 million. The seam is 70 feet thick on the surface, so Cline will build Vista as a pit mine, then go underground to eventually tap 1.7 billion tons. By 2022 it could be doing 10 million tons per year. Cline is cold-blooded when it comes to pushing marginal operators out of business. His Illinois mines took business from Appalachia. His Canadian projects will take business away from Illinois. “I think [Vista] could be the last mine operating after they’ve shut down all the rest of the coal in the world,” he says.
Cline plans to enjoy the rising sea levels in splendor. He recently acquired Big Grand Cay, a 280-acre archipelago in the Bahamas that used to be owned by Bob Abplanalp, inventor of the aerosol spray can. On his iPad, Cline scrolls through plans for a serene resort amid azure waters and non-judgmental massage therapists. It’s too expensive even for this billionaire to haul in enough diesel to keep the generators running, so he’s installing solar panels and researching Tesla batteries, and has three wind turbines on order. “Where it makes sense,” Cline says, “I’m absolutely for it.”

The Last Coal Tycoon

If radical socio-economic transformation – the term favored by South African politicians these days – had a face, it would probably look like one of the many new mining operations being established by new players in the industry.
A recurring theme over the years at the Mining Indaba has been the uncertainty in the South African mining industry. This is driven by contested regulatory and legislative issues which have looked to aggressively introduce transformative initiatives across the industry.
That narrative has not changed but this year’s gathering in Cape Town had a tinge of optimism, with miners waiting for the contentious legislation to be changed.
In 2017, the then-Minister of Mineral Resources, Mosebenzi Zwane, announced a new Mining Charter that “shifted the requirements for black ownership and employment equity at mining companies, as well as the companies from which they procure any goods and services.”
Following this, industry stakeholders say they have lost confidence in the ministry. According to the Chamber of Mines, the Mining Charter made investors wary of committing any capital to the country. A report by the Chamber of Mines claims that investment into the sector, which contributes 8% to GDP, has been stagnant since 2008.
This year, there were calls for the minister to stay away from the event. The stakeholders wanted Cyril Ramaphosa, who at the time was Deputy President, to deliver the keynote address. Zwane ignored this and defiantly asked, “In terms of the population of South Africa, what percentage of the people do these critics represent?”
“Anyone who thinks they can better the charter, our door is open for discussion,” Zwane told FORBES AFRICA on the sidelines of the event.
But, if you look past the legislative woes and the political rhetoric, you’ll see an encouraging story of a young black man who struggled to break into the sector which has previously been dominated by a privileged few.
A recent report by Statistics South Africa noted that mining production had increased by 6.5% year-on-year, up from the annual growth of 5.2% reported in October 2017. This bodes well for Black Royalty Minerals, a subsidiary of the Makole Group, which launched its first colliery in Bronkhorstspruit, a small town 50kms east of Pretoria, at the end of January.
“For us, mining is a pillar and a cornerstone of the South African economy. It’s a foundation that you cannot ignore when you talk about economic development. So, in 2014, [Bronkhorstspruit] is where Chilwavhusiku started, we did our prospecting and applied for all our authorization and after this was done we realized that we could take this project into the mining phase and that’s exactly what we did. And now, as we stand here, we are very proud of this development,” says Ndavhe Mareda, the Chairman of Black Royalty Minerals, which is 100% black-owned.
“One of our mandates is growth. We are looking at both the domestic market as well as export markets. We are working with a lot of traders in the hopes that we’ll be able to expand our horizon. And, we want to do this the right way, in a way that will not exploit the land or its dwellers and of course that works well with the society.”
<a href="http://www.forbesafrica.com/focus/2018/02/28/no-fracking-way-2/" target="_blank" rel="noopener">READ MORE: No Fracking Way</a>
Mareda was born in Venda, a former homeland of the apartheid regime in northern South Africa. He obtained his matric and moved to Johannesburg, the City of Gold, to further his studies. He obtained his Bachelor of Commerce at the University of South Africa and practiced as an accountant before venturing into entrepreneurship.
The company, which became operational in 2014, employs 350 people – 90% of whom are Bronkhorstspruit locals. It is hoped the colliery will create opportunities for the some 20,000 people that live around the mine.
“There is a huge level of unemployment in Bronkhorstspruit and our mine eases a lot of the pressure applied by the poverty. We give tender preference to the locals. These tenders may be for transportation or any other services that the mine needs to commission,” says Mareda.
This is what the disputed Mining Charter is looking to foster – assisting black-owned businesses like Black Royalty Minerals.
Disputed government policies are not isolated to South Africa.
The Democratic Republic of Congo (DRC) is no stranger to legislation battles between government and mining conglomerates. The government recently completed a new draft of what it calls the Mining Code. It awaits the signature of the president. In the meantime, mining companies are anxious about the future of their operations in the region.
Randgold Resources started developing Kibali, in north east DRC, eight years ago. After investing $2.5 billion in the operation, the giant gold mine may have to stop productivity.
Randgold chief executive Mark Bristow says the mine is on track to produce its target of more than 700,000 ounces of gold in 2018, making it one of the largest gold mines in the world. But, with the Mining Code, this prosperity may be short-lived.
“It is our express wish that the government grasps the serious consequences this ill-considered code will have on its ability as a country to attract international investment and re-investment to the DRC, and to refer the code back to the ministry of mines for further consultation with the industry,” says Bristow.
Officials, however, are confident the code will demonopolize the industry and allow the country to enjoy a percentage of the profits made from the exploration of its resources. Albert Yuma Mulimbi, Chairman of the state-owned mining company Gecamines, says it will be renegotiating its contracts with international mining partners operating in the DRC.
<a href="http://www.forbesafrica.com/focus/2017/08/10/said-kill-said-cheers/" target="_blank" rel="noopener">READ MORE: &#8216;I Said Kill Me, They Said Cheers!&#8217;</a>
Regulation is not the only issue facing mining in Africa. The former president of Nigeria, Olusegun Obasanjo, in his official address, highlighted that creating a sustainable environment for emerging miners is no simple task. He said the industry is marred by a lack of transparency as well as a legacy of mistrust of major miners. The mining industry has been accused of pursuing profits at the expense of its workforce.
Solutions to these issues need to be found.
Apart from the emergence of junior miners, the mining industry in South Africa is looking at technological advancement to resuscitate the sector.
&#8220;Technologies like robotic process automation and artificial intelligence will enable core mining activities to be performed from locations that can support a more diverse and inclusive workforce,&#8221; reads Deloitte’s Tracking The Trends report. &#8220;These new technologies will turn the mining value chain upside down, disrupting both existing business models and the traditional roles and relationships among mining companies and their customers, suppliers, and even competitors.&#8221;
This is the kind of disruption that excites another junior miner, Olebogeng Sentsho, who’s a disruptor herself as a young woman emerging in the mining industry. She is the founder of Yeabo Mining, a company that specializes in erecting and operating waste management plants at mines.
“In order to make headway in this industry we need greater support and space from various stakeholders. The increasing cost of mining, especially when discovering alternative minerals in decommissioned mines, is immense,” she says.
Sentsho says Yeabo Mining will need R50 million ($4.1 million) for infrastructure needed to mine in the current climate.
“It’s not an easy ride but it’s one worth hanging onto and I am confident about the future and the markets we’ll be serving as Africans,” says Mareda with a smile and genuine hope.

New Kids On The Mining Block

She came all the way for gold.
Akona Gwele, from a rural village named Qumbu in the sleepy innards of the Eastern Cape, a province in South Africa, arrived in Johannesburg, the city of gold, seeking opportunities she would have never found in her hometown.
Qumbu, formerly Transkei, is literally no man’s land. Young people, especially women, migrate to the cities looking for professional prospects other than nursing and teaching.
“I decided to come to Gauteng [South African province] because as the name says, it is known for being a place of gold; hence, I wanted to be closer to that gold. It promised more job opportunities and access to better education,” says Gwele.
The girl who, growing up, would fetch pails of water from the river for her household chores, went on to study electrical engineering at the Vaal University of Technology; and is today the owner of Westrand Safety, a supplier of personal protective equipment (PPE) gear to companies in South Africa.
She even imparts her signature, introducing color and style for the protective gear she designs for women in the male-dominated industries of construction, mining and engineering.
“More people are now asking for comfortable styles that will not look like work gear and we are open to creating this and making sure we set trends,” she says.
She founded the company in 2015 and is a finalist in the Eskom Business Investment Competition, which provides a platform for South African owners of small and medium enterprises (SMEs) to become part of a community of like-minded entrepreneurs as they look to build their businesses.
She is also a finalist for the South African Breweries Foundation awards via Fetola, a development agency focusing on igniting a culture of entrepreneurship in South Africa with an impetus on women, youth, people with disabilities and those in rural areas.
<a href="http://www.forbesafrica.com/woman/2018/02/13/traditional-and-thriving/" target="_blank" rel="noopener">READ MORE: Traditional And Thriving</a>
Her clientele is mostly companies that have workers on the field, and in such industries as construction, education, engineering, mining as well as municipalities. Some of her clients include Anglo American, Sun Time Square, City Power, FET colleges, to name a few.
Gwele started Westrand in her bedroom with a laptop and her own savings. Prior to that, she was a salaried employee struggling to eke out a living.
After working in the engineering field for five years, Gwele could not see herself progressing in the male-dominated sector. The ‘glass ceiling’ compelled the mother of one to quit her job as an engineering technician and join a packaging company as a marketing executive but that didn’t last long, as here too, the entrepreneur in her was wanting to break out. She resigned yet again and that’s when she founded Westrand.
Her exposure to unsafe working conditions in different industries within the engineering field is what inspired it.
“I had visited many engineering plants and heard about all the fatalities and incidents that happen to staff and most of them are due to not wearing protective gear for the right exposure,” she says.
<a href="http://www.forbesafrica.com/entreprenuers/2017/12/14/situation-forced-entrepreneur/" target="_blank" rel="noopener">READ MORE: &#8216;Situation Forced Me To Be An Entrepreneur</a><a href="http://www.forbesafrica.com/entreprenuers/2017/12/14/situation-forced-entrepreneur/" target="_blank" rel="noopener">&#8216;</a>
Her seven-year experience in the corporate world trying to establish herself as a businesswoman prepared and strengthened her for her own venture.
This small-towner is now looking to establish a state-of-the-art factory manufacturing PPE safety wear and hoping to own one that also provides school uniforms for children in the Eastern Cape.
She will create job opportunities for her people, so hopefully one day they don’t ever have to leave Qumbu looking for them elsewhere. &#8211; Written by Nomsa Legodi

Keeping Them Safe And Stylish

Just a few years into the cryptocurrency revolution, bitcoin mining is already eating up an estimated 20,000 gigawatt hours of electricity per year. That’s roughly 0.1% of global generation, on par with the power demand of Ireland. The primary culprits are bitcoin mining appliances like the Antminer S9, which is a computer processor that does nothing but endlessly crunch algorithms to lengthen the blockchain. An Antminer draws a load of 1.5 kilowatts — enough to power <a href="https://www.georgiapower.com/in-your-community/electric-safety/chart.cshtml" target="_blank" rel="noopener">two refrigerators and a flatscreen TV</a>. If you run an Antminer 24/7 for a year it will produce about 0.85 bitcoins, at a cost of about 15,000 kilowatt hours. Depending on your power prices it will cost anywhere from $600 (at 3 cents per Kwh) to $1,800 (at 9 cents per Kwh) to mine 1 coin. Even with bitcoin having plunged to $11,600 this morning, there’s still money to be made, assuming you can get your machines cheap enough. Walmart <a href="https://www.walmart.com/ip/Bitmain-Antminer-S9-14-TH-s-asic-Bitcoin-miner-Power-supply-included/724184035?wmlspartner=wlpa&amp;selectedSellerId=7506&amp;adid=22222222227136573873&amp;wl0=&amp;wl1=g&amp;wl2=c&amp;wl3=245332564990&amp;wl4=pla-402226074919&amp;wl5=9027582&amp;wl6=&amp;wl7=&amp;wl8=&amp;wl9=pla&amp;wl10=115780710&amp;wl11=online&amp;wl12=724184035&amp;wl13=&amp;veh=sem" target="_blank" rel="noopener">sells</a> the Antminer s9 for $8,200.
But what happens if the bitcoin bubble just keeps expanding? Some <a href="https://www.weforum.org/agenda/2017/12/bitcoin-consume-more-power-than-world-2020/" target="_blank" rel="noopener">naysayers</a> worry that bitcoin mining could eat up all the <a href="https://www.vox.com/energy-and-environment/2017/12/2/16724786/bitcoin-mining-energy-electricity" target="_blank" rel="noopener">world’s</a> power generation <a href="http://www.newsweek.com/bitcoin-mining-track-consume-worlds-energy-2020-744036" target="_blank" rel="noopener">by 2020</a>. Is it a realistic concern? No.
Analysts Michael Weinstein, Khanh Nguyen and their team at Credit Suisse took a look at the issue, and in a research note out today they conclude that fears of cryptocurrencies overwhelming the power grid are overblown. Start by comparing bitcoin’s 20,000 gigawatt hours per year with the 4.3 million Gwh used in the U.S. last year and 6 million by China. The analysts figured that if the price of bitcoin rose to $50,000, miners would find it economic to boost their efforts such that they would consume more than 350,000 gigawatt hours, still less than 2% of world power capacity. The team also calculated the bitcoin price that would be needed to incentivize miners to gobble up all the world’s generation capacity: $1.1 million per coin.
But that’s all assuming existing technology. As cryptocurrencies evolve, they will become more energy efficient. The proof-of-work algorithms run by bitcoin miners are needlessly complex. New coins have simpler algorithms. Ethereum is even shifting from a proof-of-work system to a more easily processed proof-of-stake system.
<a href="http://www.forbesafrica.com/cover-story/2017/09/04/bitcoin-blockchain-billions/" target="_blank" rel="noopener">READ MORE: Bitcoin, Blockchain And Billions</a>
Crypto-mining will enjoy the same economies of scale of web servers. From 2000 to 2010 the power consumed by data centers surged from 20,000 gigawatt hours to about 70,000 Gwh. At that rate it wasn’t going to take long for the growth of the internet to outstrip human ability to keep the lights on. Data centers evolved to meet the need, both growing in size and scale, as well as energy efficiency. Since 2010 server farm power demand has barely grown, despite the number of installed servers growing 6-fold. <a href="https://eta.lbl.gov/publications/united-states-data-center-energy" target="_blank" rel="noopener">According to</a> scientists at Lawrence Berkeley Lab, the industry is on track to improve energy efficiency 45% by 2020 with the likes of Google, Amazon and Facebook leading the charge.
Fears of rampant energy usage caused by rampant new marijuana cultivation were similarly half-baked. Utility companies in Colorado, California, Oregon and Washington have seen less than a 2% uptick in power demand linked to pot grows, according to the Credit Suisse team. Pacific Gas &amp; Electric even offers discount power pricing for growers — who have LED bulb technology to thank for keeping their lighting bills low.
There’s also the substitution effect. Crypto-blockchain-based payment systems will eventually replace our hack-prone credit card institutions, which themselves are <a href="http://www.datacenterknowledge.com/asia-pacific/visa-plans-its-first-non-us-data-centers-london-and-singapore" target="_blank" rel="noopener">massive</a> data centers (Visa even has one with a <a href="https://usatoday30.usatoday.com/tech/news/story/2012-03-25/visa-data-center/53774904/1" target="_blank" rel="noopener">moat</a>). And somewhere out on the margin, cryptocurrencies are likely to reduce demand for other expensive-to-mine assets, like gold, which according to S&amp;P Global has an all-in cash cost of about <a href="https://marketintelligence.spglobal.com/our-thinking/ideas/gold-mining-companies-hold-operating-costs" target="_blank" rel="noopener">$900 per ounce</a>.
<a href="http://www.forbesafrica.com/investment-guide/2017/12/11/actually-okay-completely-ignore-bitcoins-1400-rally/" target="_blank" rel="noopener">READ MORE: It&#8217;s Actually Okay To Ignore Bitcoin&#8217;s 1,400% Rally</a>
In the long run, says Credit Suisse, the breakthrough far more likely to rile world energy markets is the electric vehicle. If, by 2040, EVs grab a third of new-car market share, the world could require more than 280 gigawatts of additional power generation capacity — or somewhere in the vicinity of 2.4 million gigawatt hours. But again, that’s figuring on current technology. After <a href="http://jes.ecsdl.org/content/164/1/A5019.full" target="_blank" rel="noopener">25 years of improvements</a>, lithium ion batteries are going to keep getting better.
Technology has a way of outwitting the unbelievers. Just a few months ago Jamie Dimon, CEO of JPMorgan, called bitcoin “<a href="https://www.cnbc.com/2017/10/13/jamie-dimon-says-people-who-buy-bitcoin-are-stupid.html" target="_blank" rel="noopener">stupid</a>” and a “fraud.” Last week he said he regretted those comments, saying, “<a href="http://www.foxbusiness.com/markets/2018/01/09/exclusive-jpmorgan-chase-chairman-ceo-jamie-dimon-regrets-saying-bitcoin-is-fraud-but-still-isnt-interested-in-it.html" target="_blank" rel="noopener">The blockchain is real</a>.” &#8211; Written by <a href="https://www.forbes.com/sites/christopherhelman/" target="_blank" rel="noopener" data-ga-track="contrib block byline">Christopher Helman</a>, FORBES STAFF

Bitcoin Mining Uses As Much Power As Ireland. Here’s Why That’s Not A Problem

It is common knowledge that West Africa is blessed with abundant mineral resources. Aside from the macro-economic factors that affect the price of commodities, the micro-economic factors of each country in the region dictate the pace at which their mining sector progresses.
Australia, Canada and South Africa are generally perceived to be first-class mining destinations and are highly revered by countries that harbour aspirations of replicating their successes. They are not immune from the global factors associated with mining, but they have developed sustainable, and implementable, mining policies with supporting financial networks. It is this that should be followed, not the comparison of resources.
At present, a number of mines in West Africa are facing a number of challenges, such as a difficulty in accessing finance as well as the global slump in the sector. As a result, investment in mining projects has slowed down; though there are investments being made with China-based Chalco recently announcing plans to invest $500 million in a Guinean bauxite project. Crucially the aluminium will be produced in Guinea, a major coup for Guineans, especially as the issue of capital flight plagues the continent. In more developed mining countries, part of their success has been the ability of the government to develop and implement policies to protect resources. There is also a concerted effort to aid industrial development and, where possible, finance is made accessible to companies who wish to acquire foreign assets.
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In many West African countries, would-be participants in the mining sector are restricted to small scale and artisanal mining due to an inability to obtain finance at competitive rates. In Nigeria, for example, two out of 25 banks have desks dedicated to solid minerals. Coupled with high interest rates for loans and a dearth of viable mining projects to finance, there is a catch-22 for banks to lend to participants in the sector.
However, with the development of the Solid Mineral Development Fund, there is fresh hope and, crucially, the political will to assist artisanal and small-scale miners with funding. Though there are on-going projects in Nigeria, the level of activity pales in comparison to Burkina Faso, which as recently as 10 years ago, did not have a notable mining sector to speak of. Despite its challenges, Nigeria remains an attractive proposition for foreign investors.
Some governments may not have the financial capacity to develop projects. They then need to ensure there is a stable political environment, with a clear understanding it acts as a crucial component in attracting investors.
South Africa, which is widely acknowledged as the premier mining destination in Africa, serves as a prime example to all. It has a wealth of experience to lend. However, the recent proposed revision of the mining code has triggered a wave of uncertainty among mining companies in the country. This is the second revision in recent memory and only goes to support the idea that investors require a degree of certainty, which they can marry with their long-term plans.
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Tanzania has also ruffled the feathers of multinationals operating in the country as recent policy changes have had an adverse effect on foreign investments. The political landscape of the continent often goes through periods of volatility. For the development of a nation to happen smoothly, government interference must be limited to policy development and implementation. International mining companies, along with the expertise and technical skills they provide, also increase the profile of the host nation they operate in. This, in turn, reflects well on the host nation’s ability to create an environment suitable for international best practices to be adhered to. The resultant effect is improved credibility and more investment.
Deterring investors through haphazard policy changes is tantamount to economic suicide. &#8211; Written by Richie Seun Johnson

Government Must Stay Away From Economic Suicide

State participation in the mining sector is a throwback to the socialist mind-set that once formed the premise of many national companies. Few West African nations have contemplated setting up an organization to oversee and harness their country’s natural resources. The free market system has trumped state sentiment in ensuring that the sector is managed effectively and efficiently by private companies whose main aim is to create shareholder value.
In Africa, there have been several attempts to establish state-owned organizations to oversee the commercial development of natural resources. In 1986, Burkina Faso established the Comptoir Burkinabe des Metaux et Precieux. Structural Adjustment Programmes brought operations to a grinding halt. Globally, state-owned enterprises have seen two renaissance periods: initially in the 1960s and 1970s and recently in the early 2000s with Chinese companies taking the lead. Fears about the efficiency of how the states have been run have been the main sticking point for many critics.
Although no West African country has, or has had, a state-owned mining corporation, we should not dismiss the model as being archaic or ineffective. The DRC’s state-controlled Gecamines has adopted a model which allows for private participation. It allows the government to retain a stake in its mines while accruing the benefit of private sector expertise. In South America, there is the state-controlled and Chilean-based Codelco, which has successfully navigated through national politicking to remain a mainstay. The countries where state-controlled organizations existed have benefitted from legislation and regulations that allow for private enterprises to co-exist in a cohesive environment, which in turn leads to growth. The private sector provides experience and technical expertise, while also not being hampered by politics.
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Government must also understand its role in laying a foundation for the commercialization of its resources, rather than meddle in the affairs of private enterprises. The Debswana model in Botswana serves as a good example of a successful government and private partnership. The temptation for government to meddle in the affairs of business threatens to disturb the very fibre of the business, potentially making is a commercial disaster.
Zambia’s copper industry is an example of government poking its nose where it is not needed. Though, through no fault of their own, the price of copper plummeted to a 20-year low at the time of the state-owned corporation’s closure, the government was forced into selling its assets at a loss.
Many advantages can come with a state-owned mining company, such as having the backing of a government, but governments often don’t have the requisite technical expertise. In the past, African countries with state-owned mining companies have lacked the commercial nous to navigate through trying times and have had to resort a fire sale of assets.
Investor confidence is built on the stability of a government. Also, a private company needs to know that the government will not move the goals posts to suit their own agenda.
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The ability to navigate through the volatile terrain of the mining sector, where the prices of your resources are dependent on world events and driven by consumption, requires a strong hand from government to mitigate other uncontrollable factors, such as demand for metals, prices, as well as macro and micro economic factors. The objectives should also be clearly set out to ensure that the majority and not a handful feel the benefit of resources.
With the support of the World Bank, Nigeria’s mining sector may thrive. The World Bank’s work with the government can strengthen the sector and see mining become a key component in the revitalizing the nation’s fortunes. Despite Nigeria not hosting any international mining companies, by helping local mining companies, who to date are have received little assistance from banks, remains the country’s best bet.
This support can kickstart the growth of Nigeria’s mining sector and replicate the success of their West African neighbors. &#8211; Written by Richie Seun Johnson

Private Money Worth Its Weight In Gold

In a span of just two weeks, both Kenya and Tanzania made radical policy decisions that baffled investors in East Africa’s nascent mining sector.
Firstly, Kenya’s Parliament passed new operating rules that require all mining companies licensed in the past year to cede a portion of their business to the government for free. Companies awarded the mining licences much earlier, however, were exempted from the rules that handed the government the right to a 10% stake in all mining operations licenced after May 2016.
“The State right to a free equity participation shall not apply to any right that has been granted to a holder to mine or exploit a mineral before the coming into force of the Mining Act,” the Mining (State Participation) Regulations 2017 reads in part.
Furthermore, the law gives the Kenyan government the option of purchasing additional interest or share capital in the holder of the licence but only with the agreement of the licensee.
“Any additional interest that the State may acquire shall be agreed with the holder of the mining licence and the purchase shall be at a fair market value,” the rules further state.
Separately, in neighboring Tanzania, the National Assembly unanimously passed amended mining and tax laws to make it mandatory for the state to own at least 16% of mining projects, while also raising export royalties.
This came back-to-back with the passage of two other laws allowing Tanzania to cancel and renegotiate contracts for natural resources like gas or minerals, and removing the right to international arbitration.
&#8220;In addition to the free carried interest shares, the government shall be entitled to acquire, in total, up to 50 percent of the shares of the mining company commensurate with the total tax expenditures incurred by the government in favour of the mining company,” the new law stated in part.
The law also raises Tanzania’s royalties from gold, copper, silver and platinum exports to 6% from 4%. It further raises the royalty on uranium exports from 5% to 6%. The law also gives sweeping powers to the government to reject a company&#8217;s valuation in instances where it feels that the price is too low.
These radical decisions by Kenya and Tanzania have triggered anxiety among investors in the region’s mining industry amid fear of the unknown.
“Although they may be targeted at maximizing returns from the sector, the policy decisions have no doubt caused concern for many investors, both existing and potential new ones. Every investor out there is certainly asking what next,” says Peterson Njom, an investment analyst.
<blockquote>“Mining is a long-term venture that needs predictability in both the part of the government and the investor. If things suddenly change then the relationship will hurt one party,” he adds.</blockquote>
In Tanzania, the impact of the policy change has already borne full-blown anxiety among mining companies, especially given the ongoing feud between the government and the country’s largest miner Acacia.
Australia’s OreCorp Limited, which has operations in Tanzania’s Nyanzaga project, says it will review the subsidiary part of the regulations once they are published to gauge the impact they would have on the firm’s operations.
“The regulations, which will assist the implementation of the proposed legislation, are not yet available. The company will review the regulations once they are available,” says Matthew Yates, Managing Director of OreCorp.
The feud between Tanzania and Acacia has caught the world’s attention, rekindling debate on the frosty relation between governments and mining firms in Africa. The firm, majority owned by Barrick Gold, is now pushing for arbitration on behalf of companies that own its Bulyanhulu and Buzwagi mines, which have been hit by an export ban.
In an ongoing court case, Tanzania accuses Acacia of tax evasion in 2016 and operating illegally – accusations the miner has denied.
Analysts say the policy decisions by Kenya and Tanzania, and the feud between Acacia and President John Magufuli’s government, could shape the region’s long-term mining investment profile.
“Both Kenya and Tanzania should work to reassure investors that their respective policy changes are well meaning. Investors need predictability so that they can plan their operations and financing,” says Njom. &#8211; Written by Allan Akombo

What Next?

It was day 18 of a cold and hungry strike, haunted by death. At Western Holdings, an Anglo American mine in Welkom, in the Free State province of South Africa, the mood of the penniless crowd threatened to turn ugly; many were angry and wanted to go back to work.
To make matters worse, the news had broken that the mining companies had begun firing workers over the strike for a 30% pay rise. In two turbulent winter weeks of 1987, police had shot and beaten strikers to death; along with worker kangaroo courts, for strike breakers, it brought the death toll to nine. The first flexing by the new National Union of Mineworkers (NUM) proved painful.
Into the eye of this angry storm stepped fresh-faced strike leader Frans Baleni to address 50,000 strikers at Western Holdings.
“I was 27 years old. I was very nervous, I was shaking, I was not sure what was going to be the reaction,” he recalls nearly 30 years to the day.
<blockquote>“I told them we had two choices: stay out, or go back to work and forget the people who died. I said if you don’t accept this, kill me.”</blockquote>
There was deafening silence for a few seconds and then a chant of: “Amandla (power to the people).”
“All of a sudden, I was in the sky. The crowd had picked me up and were carrying me, singing, to the beer hall about 800 meters away. I was not sure whether I was going to fall. When we got there they bought me a drink!”
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The joy was short lived. The mining companies threatened to fire 50,000 miners and on the 21st day the strike caved in. For current South African deputy president Cyril Ramaphosa – the lawyer who founded the NUM in 1982 – it must have been a bitter blow made worse by the fact he heard the news, not from the employers, but from a journalist. Many years ago I interviewed an activist who went with Ramaphosa on an early appeal for union recognition at one of the big mines in Carletonville, west of Johannesburg, one rainy afternoon. They had to use the backdoor and were forced to stand, soaking wet, before the seated bosses in the boardroom.
The first strike ended in defeat, but Baleni, who went on to head the NUM in 2006, believes it was worth it.
“We didn’t get a pay rise but it saw the birth of the provident fund that is now worth R27 billion ($2 billion)!” chuckles Baleni.
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Baleni also believes the strike opened the way for black workers to be trained for whites-only jobs. He helped the employers to select candidates, but his activism saw him fired in 1988 and he never was trained himself.
One of the chosen was Senzeni Zokwana, who trained as a shift boss and safety specialist at President Steyn Gold Mine in the Free State. In 2000, he became president of the NUM and in 2014 he became probably the first minister of agriculture in South Africa’s history to hold an underground blasting license.
Out of three weeks of misery and violence sprang some good.

‘I Said Kill Me, They Said Cheers!’

A powerful team of private lawyers will fight the mining companies in court. With an attorney backed by four advocates, it is clear that the Department of Mineral Resources (DMR) plans to fight tooth and nail to keep its Mining Charter III intact. It promises a quick fix for the black majority calling, in tough economic times, for a larger slice of one of the richest cakes in Africa. The mining industry of South Africa contributed 7.1% of the country’s GDP in 2015, employing more than 450,000 people and paying more than $1 billion in royalties and taxes.
For a start, Mining Charter III calls for an increase in the black ownership of mines from 26% to 30% at all times. In court, the Chamber of Mines, which represents 90% of the country’s mining companies, will argue for “once empowered, always empowered” policy in that once a mining house has borne the cost of transferring ownership, into black hands, it is deemed to have done its job. This would make most companies compliant overnight.
What has become clear, since it was gazetted on June 15, is that even though it was more than four years in the making, many agree this was a hastily and poorly written document, full of holes, compiled without consultation with the industry. A source in mining says even the savvy, powerful, legally trained, regional managers of the DMR weren’t even consulted. All of this is likely to weaken the DMR’s case in court. Martin Madlala, the spokesman for the DMR, was unavailable for comment.
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“I think just the whole approach is terrible and the content is flawed. If you look at what it says about prospecting rights of 50% black ownership, plus one share; when you are prospecting you must take drill samples of the ore body. One hole will cost you R200,000; for an emerging black miner, where does he get the millions to do that with?” says Frans Baleni, the former head of the National Union of Mineworkers and current central committee member of the South African Communist Party.
The head of the New York Stock Exchange-listed DRDGold, which produces more than 140,000 ounces of gold from mine dumps around Johannesburg, feels that the 70% black ownership requirement for procurement could infringe the General Agreement on Tariffs and Trade (GATT) rules.
“Very little in this document is right, it is a shambles… I don&#8217;t think it can be executed,&#8221; says Niel Pretorius, the CEO of DRDGold.
<blockquote>&#8220;We will not be applying for mining licences in this country anymore because of the new mining rules. We do have mining licences to last us for 10 to 15 years, but there won&#8217;t be any more applications for now,&#8221; says Pretorius.</blockquote>
Defeat in court would mean a rewrite, watering down the new mining codes. It’ll be a setback for the government. Either way, after years of attempting to be a team player, capital in mining is likely to become a lot more defensive, allocated in the interests of shareholders and little else.

‘It’s A Shambles’

At independence in 1966, Botswana ranked as one of the 10 poorest countries in the world. Just over half a century later, with the help of a significant diamond endowment, the richest on the planet, government has managed to elevate the country from a low-income country to one with a mid-income per capita GDP, as it invested the proceeds of its minerals rent into physical and human capital, and into institutions.
The success of this responsible management is to be seen everywhere, as the World Bank elaborates,  “at independence, Botswana had six kilometers of paved roads, three secondary schools, too few healthcare facilities to mention, and a mere 1.5% of the population had completed primary schooling. Today, it has more than 7,000 kilometers of paved roads, more than 300 secondary schools and 95% of Botswanans live within eight kilometers of a healthcare facility, and primary school education is free.”
At a time when its southern neighbor has cold shivers running through its markets, in anticipation of whether or not rating agencies will downgrade the South African sovereign rating to a non-investment grade credit, Botswana has a ranking far from a junk credit. Its upper Investment grade is the highest in Africa.
Government acknowledges, however, that among the challenges it faces, a high HIV/Aids infection rate (the second highest in the World) slows growth. It recognizes it has to diversify the economy, away from an overdependence on mining – especially diamonds – to areas that can carry GDP growth forward. For this reason, it has rolled out the National Development Plan (NDP-11) into tourism, construction, energy and transport. In short, government has assessed that doing the same is not good enough, and to use the worn cliché, diamonds will not be forever.
It has not forgotten where the roots of its humble existence began, and has not forsaken the mining sector’s contribution to the growth in its output, for beneath its soil, lies some 200 billion tons of coal – an estimated two thirds of Africa’s total – a happy co-existence with the volcanic diamond treasures its fiscus holds so dear, and which government manages proceeds from in its public-private partnership venture with Debswana. With so much focus on mineral wealth, it is easy to forget where other areas of promoting economic growth exist. A good example is Botswana’s biodiversity of resources, such as the Okavango Delta, as well as the Kalahari and Chobe, which boost eco-friendly tourism uplift socio-economic conditions of rural communities.
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While the need to diversify the economy grows urgent, there is a frank acknowledgment that government cannot do this on its own. This land-locked country faces challenges from climate change, and has a critical shortage of water and electricity, which threaten any sustainable moves to diversify the economy. Also, government will not hesitate to engage the help of the private sector.
As controversial as the decision may have been to close loss-making copper and nickel mines, the government has indicated a strong resolve to protect its hard-earned fiscal integrity, making any adjustment it deems necessary which would shield the taxpayer, despite mine closures shedding jobs.
Another indication of this responsibility was the decision taken by the Botswana Power Corporation to shed its loss-making Morupule B power station. The drive to privatize the  state-owned enterprises theoretically embraces the concept of Public-Private Partnerships, structures considered to be generally successful.
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Although 4.3% GDP growth in 2016 may not be high by historical standards, it remains a solid base against which key financial stability ratios can be monitored by credit rating agencies. A surplus of 16% of GDP on the current account of the balance of payments, and an almost negligible budget deficit of -0.7% of GDP, appear to have underpinned the decisions by the rating agencies to maintain the upper investment grade ratings by S&amp;P (A-) and Moody’s (A2) last April.
If there is a conundrum that policymakers have to solve, it is not that GDP growth must be diversified, and that a stronger export base will drive growth in output sufficiently to alleviate poverty and income inequality, but rather that the success of economic diversification will be reflected in economic intangibles, such as better levels of education, better healthcare, better institutions to manage the rents derived during times when economic cycles are more volatile and in better regulating private enterprise. &#8211; Written by Colen Garrow

An African Darling For Investors

With billionaire mining magnate Patrice Motsepe at the helm, the newly crowned African champions Mamelodi Sundowns are not short of resources.
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Adding up all the presumed transfer fees and estimated running costs over the 13 years since he took ownership, Motsepe has invested more than R150 million ($11 million) in the club, a sum far in excess of what any other owner, among the 16 teams that make up South Africa’s Premier Soccer League (PSL), has put into the game.
The money took a long time to show any kind of return but Sundowns, ironically after a round of recent belt-tightening, can now look to run their operation independently after the windfall of their recent success.
Winning the African Champions League in October has ensured record earnings for the Pretoria-based club, although Motsepe is giving a fair chunk of it to his players as a bonus for their achievement.
In the Champions League, Sundowns took home a purse of $1.5 million for winning – by far the biggest sum the club has ever earned from a single competition. That is, indeed, true of any South African team.
The biggest prize in the domestic game is the R10 million ($750,000) that the winners of the league earn.
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The Champions League purse is to be shared among the players, said Motsepe in the wake of their success in Egypt, where Sundowns overcame hostile conditions in a display of resilience to win the title – only the second time in 21 years that a South African club has done so.
It is the biggest achievement in club football on the continent and brings with it a raft of other opportunities.
First, Champions League success means participation in the Fifa Club World Cup in Japan at the end of the year.
The competition, featuring all the continental champions, also offers prize money with a minimum of $1 million just for participating and going up to $5 million for the winner.
But unlike the Champions League campaign, where the cost of traveling through Africa can be onerous, Fifa pay all costs, including supplying 35 business class return tickets to Japan per club.
Another $1 million would be well received, although the costs of South African football are such now that it is pretty swiftly shredded through.
Not three months ago, Sundowns paid R11 million ($820,000) to sign silky midfielder Sibusiso Vilakazi from Bidvest Wits; a record fee for an internal move in the South African market. They also bought players from Bloemfontein Celtic and Free State Stars, and imported a striker from the Ivory Coast in a bid to strengthen their squad for a rigorous campaign to come.
To do so, the club has to get extra funding from Motsepe.
It is not just for the transfer fees, but the wages needed to lure these players to the club as well.
Bafana Bafana fullback Anele Ngcongca had opportunities to stay in Europe when it became clear he would leave Belgian side Genk, and also attracted interest from the lucrative Chinese Super League. But he has been lured to Pretoria with the promise of not only competing for silverware, but also a hefty pay-packet as he heads towards his thirties.
No PSL club survives on the monthly income of R1.5 million ($100,000) that they receive as their share of the television deal that broadcaster SuperSport agreed to for the next five years.
With attendances declining, gate receipts are for many clubs no longer a revenue source. They lose money on the costs associated with match days, such as security, stewarding and ground rental.
For many clubs, surviving without a benevolent owner with big pockets depends on the ability to develop and then sell players. Some have made it a useful enterprise and keep their heads above water, ensuring survival but effectively losing their ability to be truly competitive.
Free State Stars have an uncanny ability to find quality players at no cost and then sell them on at a healthy profit. Ajax Cape Town, with their extensive youth network, is another ‘selling’ club.
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As is the trend internationally, emphasized by the rise to the winners’ podium of Manchester City and their Abu Dhabi investors in England or the Qatari cash that has made Paris Saint-Germain the runaway power in France, so the South African league too is fast becoming a lopsided arena.
It was no accident that last season’s top two finishers – Sundowns and Wits – are owned by tycoons with a passion for the game. The growing rivalry between Motsepe and Wits owner Brian Joffe is set to continue this season.
Perennial challengers like Kaizer Chiefs and Orlando Pirates are increasingly unable to compete for the best talent – both coaching and player wise. It was not by accident that last season was the first time in almost 50 years of professional football in South Africa that neither of the well-supported Soweto giants won a single trophy.
They will remain competitive while their revenue stream, from sponsorship and replica shirt deals, is strong but that they are no longer the ‘big bulls in the kraal’ is all too evident.
SuperSport United, with the backing of MultiChoice, could grow into the third power in the South African game but do not have the largesse and impulsive ability to strike in the marketplace that both Sundown and Wits possess.
Sundowns’ new-found status and confidence gives them the sporting impetus to continue achieving. The bedrock of Motsepe’s cheque book remains a firm foundation but it helps they are also contributing to the coffers with their success.
The trick for them is to ensure that success of the last two years, which has also seen them win the domestic league title and the Telkom Knockout cup competition, continues for the next few years.
They are best placed to create a dynasty and become goliath in their own league, just like Lyon in the French Ligue 1 who claimed their domestic title for seven consecutive years in early 2000, or Paris Saint-Germain, who have won the last four.
Sundowns’ Champions League success this year could be the start of a period of dominance the rest of the league will be powerless to break.

Wealthy And Healthy

Africa’s biggest platinum industry faces one of the most bruising years in its history. Unions and management have drawn battle lines for pay talks and a cloud of question marks hangs over the mining laws – dual uncertainty that could deter foreign investors from putting money in a country that produces 70% of the world’s platinum.
In July, pay talks for a new one-year deal began. Unions for 130,000 workers in South African platinum mines, sat down with the big three: AngloPlats, Implats and Lonmin. They are likely to prove tricky and drag on for weeks. The majority union, the Association of Mineworkers and Construction Union (Amcu), wants a 15% pay rise; the second largest, the National Union of Mineworkers (NUM), wants 20% across the board. Both unions are eyeing the recovering platinum price nosing above $1,000 an ounce for the first time in years. In August 2011, it was over $1,900.
<div id="attachment_5133" style="width: 210px" class="wp-caption alignleft"><img aria-describedby="caption-attachment-5133" decoding="async" loading="lazy" class="size-medium wp-image-5133" src="/wp-content/uploads/2017/05/Peter-Leon-017-200x300.jpg" alt="" width="200" height="300" />Peter Leon</div>
Demand for platinum, thanks to jewellery and automotive manufacturers, rose 10% in the first quarter of this year, according to the World Platinum Investment Council, while supply dropped 11%. It promises profit for South African mines if they can keep costs down; wages make up almost half of costs.
Amcu has 61% of the membership at AngloPlats, 62% at Implats and 82% at Lonmin. It holds the aces and will play a mean game for a minimum wage of R12,500 (around $860) a month. This wage has been the rallying call from Amcu ever since the bitter Marikana strike of August 2012. At the announcement of its demands in July, FORBES AFRICA questioned R12,500, saying it should be more like R20,000, taking into account four years of inflation.
“If we say R20,000 for the lowest paid, the employers are going to run away so we will go for R12,500 and work up from there,” says, the president of Amcu and part-time preacher, who appeared bullish and ready for action.
“We are applying for a pay rise here, not a strike. If the employers apply for a strike we will give it to them.”
The platinum employers are likely to be a tough nut to crack; inflation, at around 6%, is on their side. They are also struggling against years of falling commodity prices and productivity. On the Johannesburg Stock Exchange, AngloPlats shares lost two thirds of their value last year and Lonmin, kept afloat by a shareholders’ bailout in 2015, lost 99%.
Aside from the industrial problems, South Africa faces many more months of uncertainty over the country’s mining laws. Amendments to the Minerals and Petroleum Resources Development Act – which governs mining – have spent four years going back and forth through Parliament; questions have been raised over the constitutionality of the amendments. Investors take a dim view of plans to make resources – like iron and coal for the steel industry – designated minerals under the law. That would mean miners accepting government prices and maybe having to ask permission to export. This could lead to a trade law complaint at the World Trade Organization (WTO). China suffered a WTO ruling against it recently in a similar case concerning rare earth.
Then there are concerns about the discretion the law hands to the minister, giving him the power to cancel mining licences and prosecute.
“It is open to discretion, with unclear rules, which makes it very difficult to invest with that level of uncertainty and that is the long and short of it,” says Peter Leon, a mining lawyer with Herbert Smith Freehills, at a briefing in Johannesburg in June.
“We are going to a third rewrite without solving the problems of the first two.”
The bill is on its way back through the legislature and a number of bodies, including the Congress of Traditional Leaders of South Africa. Leon and his colleagues say the chiefs came up with one of the best ideas yet – an independent body to allocate the state-owned mineral rights.
With Parliament adjourned for the August 3 municipal elections, mining experts fear it could be well into next year before South Africa’s mining code is fixed. Investors seek stability and regulatory certainty; with every passing month there is a risk more of them will turn away.

Tag: Mining

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