SA Mine 10th edition

Highlighting trends in SA Mining industry

The 2018 financial year a mixed bag of performance in 2018 as bulk commodity prices continued to rise from the lows at the beginning of 2016, while precious metals continued to struggle.

Overview

The 2018 financial year proved to be a challenging year for South African mining companies.
Globally the financial performance of mining companies improved significantly from the previous year. That position was to a large extent mirrored by South African bulk commodity producers with iron ore, coal, manganese and chrome performing very well. Unfortunately, the aggregated South African mining industry that is more exposed to precious metals did not enjoy the same benefit from price increases.

 

Market capitalisation by commodity

Market capitalisation by commodity

Key findings

It is evident that the risk environment in South Africa is not too dissimilar from the global environment. However, the following points stand out from the comparison:

  • Cost pressures are impacted by:
    • Labour relations and wage negotiations
    • Maintenance and loss of critical skills
    • Reliance on third party infrastructure
    • Failure to deliver the full potential of operating assets
  • Public perception/license to operate South African mining companies- the socio economic environment around mines is a major concern.
  • 3 global risks that are not prominently disclosed by most South African mining companies are:
    • Natural disasters
    • Technology and cyber risk
    • Market competition

The mining industry adds significant value to the country and its people.

Stakeholders in the industry include employees and their families, unions, government, shareholders, suppliers and customers. Total value created by the entities that disclosed value-added statements increased by 2%, from R171 billion to R174 billion. Employees still take the lion share of value added at 47%, followed by government through direct taxes, as well as employee taxes and royalties with 24%.

 

The current year impairments of R46 billion doubled from the previous year (R22 billion) mainly as a result of gold and platinum impairments.

The impairments seen in these two industries are a testament of their struggles.

  • After last year’s net profit, this year’s companies are back in a loss-making position due to the higher impairments and lower EBITDA.
  • Capital expenditure recovered from the lowest real levels in ten years to reflect a 22% increase.
  • The Mining Index has outperformed the JSE All Share Index over the last two years. Despite the recovery from January 2016, it is still lagging the All Share Index over the last 15 years.



Contact us

Michal Kotze
Africa Energy, Utilities and Resources Leader, PwC South Africa
Tel: +27 (0)11 797 4603
Email

Andries Rossouw
Partner, PwC South Africa
Tel: +27 (0)11 797 4060
Email

Mining Enquiries
EU&R Centre of Excellence, PwC South Africa
Tel: +27 (0)11 797 5332
Email

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