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Anglo CEO says investors need security

And more updates from the Joburg mining indaba.

South African mining executives, investors and officials gather in the nation’s economic hub for the Joburg Indaba conference to discuss the industry’s investment prospects after years of regulatory uncertainty.

Overall, it’s been a good year for South African miners as the rally in iron ore, gold and platinum-group metal prices boosted earnings and put dividends back on the agenda. Still, looming labour disputes, a reliance on a weak currency and the slow demise of gold mining leave the industry with plenty of challenges.

Read: Amcu seeks dispute mediation

Here are the latest developments, updated throughout the day.

Key developments:

  • Anglo American Chief Executive Officer Mark Cutifani says mining could lead South African economic renewal, but investors need reassurance their money is secure
  • Anglo American Platinum CEO Chris Griffith said the outlook for PGMs will be good for years, but added that South Africa’s labour disruptions, crime and xenophobia are deterring investors
  • Harmony Gold Mining CEO Peter Steenkamp said his company is searching for new gold frontiers beyond South Africa, where the only opportunities are in consolidation
  • Anglo American won’t invest in new thermal coal mines in South Africa, but will extend the life of its existing assets
  • South32 Chief Operating Officer Mike Fraser said power cuts by South Africa’s electricity utility is hurting the company’s Hillside and Mozal aluminum smelters

Anglo won’t invest in new thermal coal mines (12:05 pm)

Anglo American probably won’t invest in new thermal coal mines in South Africa as energy transition leads to more volatile prices, CEO Cutifani said in interview on the sidelines of the conference. At same time, the company will extend the life of the existing thermal assets it holds and won’t just walk away, he said. Those assets have attracted interest from potential buyers in the past, and CEO expects that to continue.

Cutifani is enthusiastic about opportunities in PGMs, and Anglo is undertaking a full feasibility study on the Mogalakwena concentrator. The company is committed to investing in the Venetia diamond mine, although the project has to do better, he said.

Anglo CEO says investors need stability (10:35 am)

Anglo American Chief Executive Officer Mark Cutifani said there is no shortage of geological opportunities in South Africa, but to attract mining investment requires political stability and regulatory clarity. While encouraged by positive improvements in the political arena, the “parlous state” of public finances remains a challenge, according to Cutifani. The CEO said companies must work with the government to tackle “unresolved issues” in the nation’s Mining Charter, which seeks to address inequalities resulting from apartheid.

The multiplier effect of growing the mining industry – which currently supports about 4.5 million people – could drive a “wholesale economic renewal of South Africa.” Still, Cutifani cautioned that abundant and high-grade deposits won’t guarantee investment. “There are many other factors besides mineral endowment that influence where investors decide to put their money, all of which drive reassurance to investors about the security of their investment over time,” he said.

Amplats CEO sees good PGM fundamentals (10:02 am)

Anglo American Platinum CEO Chris Griffith said fundamentals for platinum-group metals will remain good for a “number of years.” The improving market has enabled producers to increase their profitable supply and has drawn greater interest in platinum stocks from international investors, he said. The company known as Amplats is studying a number of projects for its “next wave of growth,” according to the CEO.

The regulatory environment in South Africa has improved, but the government needs to resolve the issue of community disruptions around mines, which is leading to huge losses for producers, Griffith said. Labour disruptions, crime and xenophobia are deterring investors, while policy differences between government and ruling African National Congress are also a concern, he said.

© 2019 Bloomberg L.P.

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In short – every bit of legislation and every policy incentives some forms of behaviour and disincentives other forms of behaviour. The Mining Charter, this powerful weapon in the ANC’s socialist arsenal, incentivises the zamma-zamma industry and penalises the formal mining industry. The Mining Charter puts the illegal miners at a distinct advantage over the formal sector.

They do not pay taxes, they do not BEE, zero “local beneficiation”, they do not adhere to labour laws, they do not have to fight for a mining license, no mineral rights, no safety stoppages and no maximum working hours, while the formal industry has to adhere to all those requirements.

The ANC creates a strong competitive advantage, or a moat, around the business models of the zamma-zamma industry. No legal business can compete with the illegal miners because the ANC protects, and incentivises the illegal miners. This is why the illegal miners are prosperous and expanding, while the formal mining companies, that create all the formal jobs, are imploding.

This is what Mr Cutifani meant to say, but unlike me, he is a nice guy.

End of comments.

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