SA mining barely recognisable from what it was 20 years ago

SA’s mining sector is barely recognisable from what it was 20 years ago. Back in the early 2000s, gold and platinum were the dominant metals, with coal and iron ore nipping at their heels.

No one knew much or anything about ESG (environmental, social and governance) standards, de-carbonisation or sustainability. Eskom was a reliable and cheap energy supplier, and there was no need for solar panels.

Coal is the dominant mineral, and gold declines

Fast-forward to 2023, and all that has changed. Coal is the dominant mineral, much as it is reviled in certain quarters, gold continues its decline, and so-called clean metals such as copper and lithium are in the ascendant.

PwC’s Mine 2023 Report released this week chronicles the extent of mining’s metamorphosis.

The number of Top 40 mining companies exposed to coal has virtually halved (to 11), and of the Top 40 luminaries of 20 years ago, a third have been merged with other players.

Names like Gencor, Iscor, Johnnic, and JCI have long since disappeared; their assets shoe-horned into other mining conglomerates.

Welcome to the era of the mega-mine, where consolidation, capital efficiency, and brutal competition for resources are dictating the pace and direction of travel.

In 2003, the market capitalisation of the Top 40 mining companies was less than $400 billion. Last year it was more than $1.2 trillion.

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‘Clean metals’

For various reasons, mining giants are taking the energy transition and ESG seriously. Funders are steering clear of anything smelling of fossil fuels and carbon emissions, and that is energising the rush into clean metals.

The headlong rush into alternative energy is urged both by Eskom’s erratic supply as much as investor pressure.

At the Junior Mining Indaba in Joburg this week, several of the junior miners in attendance spoke proudly about their plans to move off grid.

“We’re developing a plan to be independent of Eskom over the next five years,” said Jan Nelson, CEO of Copper 360, which recently listed on the JSE and is developing an ambitious copper project in the Northern Cape.

There is little sign that coal is going to disappear anytime soon from SA’s mining matrix. The Ukraine conflict, and the Covid disruptions to the global energy supply before that, ensured coal was the most significant contributor to the Top 40 revenue in 2022.

The last time this happened was in 2013. Despite this, coal is clearly in long-term decline as the world goes through its faltering energy transition.

The hunt is on for copper, lithium, and other green metals, aided by tax breaks, trade deals that incentivise critical minerals, legislation, and generous funding and grants for clean energy projects.

“The value of critical minerals deals increased by an impressive 151% from 2021, accounting for 66% of all deal value in 2022,” says PwC.

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Dealmaking

On the other hand, gold deals fell by 50%, marking the end of the precious metal’s dominance of M&A for the past several years.

Copper was the year’s hot commodity, representing 85% of all critical minerals transactions and 56% of the Top 40’s M&A activity.

“As a key metal that enables electrification and renewable energy, copper should be in high demand during the years ahead,” adds the report.

Mining is back as a force to be reckoned with. Afrimat CEO Andries van Heerden, speaking at the Junior Mining Indaba, explained how the construction company’s diversification into mining altered its earnings trajectory over the last decade by orders of magnitude.

Had it remained reliant on the construction sector, its earnings would have flat-lined over the last decade. Instead, it entered the mining space and rode the commodity boom, delivering a profit bonanza to shareholders.

This article originally appeared on Moneyweb and was republished with permission.
Read the original article here.