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More mines declaring force majeure

Mines are being forced to declare force majeure, as production winds down due to the lockdown.
Image: Shutterstock

Anglo American Platinum (Amplats) was the first of local miners to declare force majeure, three weeks ago, after an explosion at a converter plant forced its hand.

A force majeure is where a company can’t fulfil its contracts, as a result of unforeseen circumstances.

The shutdown of the converter plant is expected to cut 2020 production by one million ounces of platinum group metals (PGMs). This had nothing to do with Covid-19.

Read:
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Then the virus struck.

This week, Impala Platinum announced that all consultants and contractors at its operations had been issued force majeure letters to legally suspend its obligations under those contracts.

Force majeure letters have also been issued in respect of offtake agreements with both group companies and third parties, as well as customer supply contracts, to legally suspend our obligations under these contracts,” says the Implats statement. “With respect to offtake agreements, deliveries from all parties to the smelter were suspended on 24 March 2020 to enable the smelting operations to prepare for an orderly shutdown. With respect to customer supply contracts, deliveries can resume once the force majeure is lifted, provided delivery logistics permit.”

ARM announced that its Two Rivers Mine received notice of force majeure from Implats, saying it could no longer take delivery of concentrate for processing until the lockdown was lifted.

Anglo American has moved the bulk of its operations to care and maintenance for the duration of lockdown. “As a result, we’ve unfortunately had to declare force majeure on certain supplier contracts for goods and services that fall outside the scope of approved essential services and the limited scaled-back operations we’re allowed to continue,” says a company statement.

Anglo American spokesperson Sibusiso Tshabalala says this is not a blanket force majeure, and applies only on certain supplier contracts. The good news is that employees will continue to receive basic salaries and housing allowances, as well as company contributions to medical and pension funds, throughout the 21-day lockdown period.

Sibanye Stillwater’s senior vice-president for investor relations, James Wellsted, says all companies that stop operations for an extended period will be stretched to meet contractual arrangements – both with customers and suppliers and contractors. “As will most of the SA mining companies who have been impacted by this lockdown, we have obviously given our partners force majeure notices.”

On Monday Gold Fields announced that its South Deep mine had been placed on care and maintenance for the current three-week lockdown period. Sven Lunsche, vice president of corporate affairs at Gold Fields, says 7% of the usual staff complement remain on site at South Deep, though it has been able to continue delivering product to the bullion banks. Apart from South Deep, the rest of the group’s production has been largely uninterrupted, though stricter regulations are being put in place by governments around the world, which poses a risk during the current financial year.

Royal Bafokeng Platinum has placed its operations on care and maintenance and told a large number of employees and contractors to stay at home.

Other mining groups supplying essential products, such as coal to Eskom, are likely to experience minimal interruptions due to the lockdown. The government is also desperate to get its hands on foreign currency over the coming weeks, and will want to see companies ramp up coal exports to the [greatest] extent possible. ARM Coal says its supply to Eskom will continue during the lockdown, though exports will need to be approved by the Department of Mineral Resources and Energy, and will be subject to the availability of rail capacity.

Likewise, coal producer Exxaro says it will be able to continue with its production activities “subject to the approval of an application that demonstrates that these activities are essential and that the necessary measures have been taken to prevent possible coronavirus infections.”

South32 says it is preparing for a potentially extended period of low commodity prices, and has announced a $160 million cut to capex and exploration in response to the spread of the Covid-19 virus. It has also suspended a $121 million share buyback programme, which will be reviewed later in the year. Its SA manganese operations, along with export coal production from South Africa Energy Coal, have been placed on care and maintenance. “The Hillside Aluminium smelter and domestic coal production from South Africa Energy Coal are considered businesses essential for the maintenance of power generation, given the role they play in the sustainability of Eskom’s generation network and will continue to operate during the lockdown,” says the group in a Sens statement.

For those mines invoking force majeure (or unexpected calamity making it impossible to perform on contract terms), the big question is whether or not the lockdown will be extended beyond 21 days.

For the time being, mines appear sufficiently cash-flush to pay employees, but any extension beyond the 21 days could start to hurt. Then you can be sure mining executives will be knocking on President Cyril Ramaphosa’s door.

The country might be able to sustain a 21-day shutdown, but anything longer could be fatal.

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COMMENTS   3

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Just close the whole lot down. Forever.

@#$%^& unions want danger pay. AT A TIME LIKE THIS????

Shows you the kind of people in this country. No wonder they are forever suffering!

Surely there is a way to avoid lockdown for these key industries that keep SA’s economy & exports going?

Especially if staff are kept on site or in mining hostels. Mines can also do their own temperature checks on staff each day.

China was on lock down for 80 days, and every citizen there is watched and monitored by the government, that’s how they were able to reduce the spread. They used high tech monitoring technology to identify and then isolate infected people. We don’t have the same capacity to do the same, people don’t understand how rapidly this virus spreads! If China took 80 days to contain the spread how are we going to do the same in 21 days?

End of comments.

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