Mining production declines further to 1.5% in April

Mining production declines further to 1.5% in April

File picture of the entrance to Gloria mine near Middelburg in Mpumalanga.

Eskom is ‘a significant risk to the future sustainability of SA’s mining industry’, together with rising costs and uncertainty ‘around security of land tenure’.

The contraction in mining production deepened slightly in April to 1.5 percent year-on-year following March’s 0.7 percent year-on-year decline, Statistics South Africa (StatsSA) said on Thursday.

But this was markedly less severe than February’s reading, which saw production levels plunge by 8.1 percent compared to the same period last year.

The performance of the gold sector continued to plague overall mining industry production as gold was the largest negative contributor at 19.5 percent, underpinned in part by a five-month strike at the gold operations of Sibanye-Stillwater, which ended mid-April.

Lara Hodes, Investec Bank economist, said that South African gold mines are typically old and deep, and continue to struggle with dwindling grades and productivity.

The gold sector constitutes a marked 16 percent of the mining basket and fell by 19.5 percent year-on-year in April, in turn detracting 2.7 percent from the headline number.

Iron ore production also waned notably, falling by 11.7 percent year-on-year in April thereby reducing the top line reading by 1.7 percent.

The World Bank is anticipating metal prices to continue rebounding from their 2018 troughs but averages 1.9 percent lower in 2019, but in contrast, precious metals prices are projected to rise in 2019 on “the possibility of an interest rate cut in the United States”.

Hodes said the softening in global growth and the prolonged uncertainty around the US-China trade agreement was expected to weigh on metals prices.

“Aside from these external considerations, the domestic mining sector continues to face ongoing challenges, undermining its ability to operate efficiently and profitability,” she said.

“Trepidations around security of land tenure, climbing administered prices and other costs, including the imposition of a carbon tax in June, combined with electricity supply concerns weigh heavily on the sector, with Eskom a significant risk to the future sustainability of SA’s mining industry.”

African News Agency (ANA)

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