The Minerals Council South Africa has welcomed the High Court judgment that the Mining Charter is not binding legislation, but rather an instrument of policy and that mining companies will not be required to “top-up” their empowerment credentials.

The Minerals Council has sought a judicial review of the third iteration of the Mining Charter, published in 2018, with its primary concern being the provisions on how previous black economic empowerment (BEE) is not recognised in the renewal and transfer of mining rights.

The High Court ruling, handed down by Judge Fayeeza Kathree-Setiloane on Tuesday, removed the clauses dealing with the renewals of existing mining rights and the transfers of mining rights, compelling mining companies to “top up” their BEE shareholdings to the 2018 Charter levels, which would have the effect of diluting shareholders.

The industry has raised concern about retaining mandatory BEE ownership in perpetuity, arguing that it will stifle investment in the sector.

The ruling has confirmed the “once empowered, always empowered” principle, and that therefore, the historically disadvantaged South African ownership status of existing mining right holders, which wish to renew or transfer their rights, must automatically be recognised by the Department of Mineral Resources and Energy (DMRE).

“The judgment has a materially positive impact on the security of tenure of existing mining rights holders. As a result, existing mining right holders now know that if they previously satisfied the empowerment requirements imposed under any version of the charter, they will not be required to do so again,” said Herbert Smith Freehills South Africa partner and Africa chairperson Peter Leon.

Leon also commented that the judgement vindicated his long-held view that the Mining Charter, in all its iterations, was simply a policy document and not a statutory instrument such as an Act or regulations.

“. . . Mining Charter III cannot give rise to legally binding obligations,” he said, stressing that it was “nothing more than a socioeconomic compact between government, labour and the mining industry”.

The original Charter, signed in October 2002, Leon highlighted, reflected exactly this principle.

“Regrettably the 2010 and 2018 versions purported to turn what was no more than a compact into a binding legislative instrument with all the associated regulatory uncertainty,” said Leon.

He said that “hopefully, this carefully reasoned and strong judgment will give the DMRE cause to reflect on what has gone wrong in the past ten years and put the industry back on a much-needed path of regulatory certainty and predictability”.

The judgment also sets aside the provisions around procurement of goods and services (especially the capital goods target), and supplier and enterprise development which the Minerals Council argued contained unachievable targets for mining companies to meet, making compliance with the 2018 Charter problematic.

The judgment also sets aside provisions in the 2018 Charter related to the Diamonds Act and Precious Metals Act to impose targets set out in the Charter on licence holders under those Acts.

The provisions in the 2018 Charter related to mining companies not complying with ownership and mine community development requirements, and thus being in breach of the Mineral and Petroleum Resources Development Act, potentially having their mining rights suspended or cancelled was also removed in the judgment.

Law firm Webber Wentzel’s Jonathan Veeran, Bruce Dickinson and Rita Spalding commented that the judgement, although sound in law, was likely to be appealed.

Chairperson of the Portfolio Committee on Mineral Resources and Energy Sahlulele Luzipo has welcomed the judgement, but said that it could potentially bring challenges to the existing harmony between the mining sector and the regulator.

“Although there is no winner or loser, the judgement may create an environment where the regulator resorts to legislating ever...

Cennergi, the wholly owned renewable energy arm of coal mining company Exxaro and South Africa’s second-largest renewable energy company, is being deployed to decarbonise the Johannesburg Stock Exchange-listed company’s own coal mines.

In addition, Exxaro, through Cennergi, is in discussion with other mining companies to bring them green energy from a mining know-how position and help them on their way to significant decarbonisation.

“We’ve been playing in this decarbonising space as a business from as early as 2009 because the net benefit of decarbonisation that comes about by introducing renewables is the part that really sets us into the next phase of our own decarbonisation strategy,” Exxaro CEO Mxolisi Mgojo explained in a Zoom interview with Mining Weekly. (Also watch attached Creamer Media video.)

Exxaro created renewable energy company Cennergi in 2012 and built two renewable wind farms with a combined capacity of 229 MW in the Eastern Cape in 2016.

In 2019, it acquired 100% of Cennergi, which is taking steps with a view to generate renewable energy for Exxaro’s Grootegeluk, Belfast and Matla coal mines.

The net benefit for Grootegeluk alone is going to be a 70 MW renewable energy solution, developed by Cennergi on an arm’s length based contract.

Grootegeluk will be the offtaker with Cennergi helping the large Exxaro coal mine to secure electricity security at lower cost on a reduced carbon footprint.

“That renewable energy solution, on its own, is going to reduce Grootegeluk’s carbon emissions by 35% - just one project,” Mgojo enthused.

Diversified miner South32 on Tuesday announced that COO Mike Fraser, who has accountability for the African and Colombian operations, would leave the company.

Current VP of operations at Worsley Alumina, Noel Pillay, will be appointed as COO, alongside Jason Economidis, who will remain COO with accountability for operations in Australia.

Pillay will return to South Africa to allow for a handover period with Fraser.

“Fraser has been part of the South32 lead team since day one. His contribution to the company will be lasting and include his roles in securing power supply for Hillside to support the sustainability of the smelter and the roll-out of our energy initiatives across our business, underpinning the stable and predictable performance at many of our operations,” said CEO Graham Kerr.

“Pillay has extensive experience from over 25 years at our operations where he has held various leadership roles. At Worsley Alumina, Pillay led improvement initiatives that have enabled the refinery to achieve record production in 2021, operating above nameplate capacity for the first time while also overseeing an improvement in safety performance.

“Prior to Worsley, Pillay was VP of operations at Hillside Aluminium. He will bring considerable operating expertise to his leadership of our operations in Africa and Colombia, and as a member of the South32 lead team,” said Kerr.

Precious metals miner Sibanye-Stillwater has confirmed that two mine rescue team workers have died at the Kloof mine, in Carletonville, because of heat exhaustion.

The rescue workers were on a search mission for an employee at the Thuthukani shaft, after the employee was reported missing on Sunday morning.

He did not return to the shaft station with his team after completing planned routine repairs in a haulage, close to the shaft area.

Sibanye investor relations senior VP James Wellsted told Mining Weekly on Tuesday that the deceased employees were part of a six-person proto team to find the missing employee.

The search for the missing person remained under way, he stated.

The Association of Mineworkers and Construction Union alleged in a statement that Sibanye had failed to install technology that could monitor temperatures and noxious gases underground, as well as missing person location technology, at the mine.

JOHANNESBURG (miningweekly.com) – Gold mining company Gold Fields has reached agreement with global engineering group Sandvik to trial a battery electric vehicle (BEV) underground loader at its South Deep gold mine, with the project starting towards the back end of next year, Gold Fields EVP for South Africa Martin Preece said on Tuesday.

Preece was responding to media reports of Sandvik undertaking a two-year BEV production study in Australia in partnership with the Johannesburg- and New York-listed Gold Fields.

South Deep is a bulk mechanised underground mining operation in the Witwatersrand basin, near Westonaria, 50 km south-west of Johannesburg, and the eventual likely use of BEVs is seen as part of a strategy of reducing carbon emissions from its operations. Also under construction is a 40 MW solar power plant.

Speaking to Mining Weekly by phone, Preece said that Sandvik would be bringing a trial unit to South Africa next year as a promotion at next year’s Electra Mining Exhibition. Thereafter, it would be deployed for trialling at South Deep towards the back end of next year.

“We’ll run the unit and Sandvik will obviously want the information from the trial as much as we will. As South Deep’s existing diesel fleet over the coming years reaches the end of its economic life, we will steadily section-by-section convert the mine to a battery electric fleet,” said Preece, who emphasised the need for the conversion to be carried out in a very measured way.

During the trials, the BEVs will be adjudged for their uptime. “You can swap the battery in six minutes or less,” the media release quotes Gold Fields VP operations Australia Graeme Ovens as saying.

Another advantage cited by Ovens is a better underground working environment of less heat and fumes.

St Ives is targeting an 85% contribution from renewable energy, which will be up on the 55% renewable energy contribution from a hybrid power system at Gold Fields’ Agnew gold mine, also in Western Australia.

Glencore is the leading major mining company when it comes to its portfolio of transition metals, says Deutsche Bank Research.

The bank’s research analysts afford Glencore a top 1-to-5 position in copper, cobalt, zinc and nickel – metals they describe as being central to the world’s decarbonisation efforts.

In more research on the London- and Johannesburg-listed diversified mining and marketing company:

Morgan Stanley Research says that, absent of meaningful supply growth, even its 'commodity-of-the-past' – coal – can have sharp up-cycles and generate record margins; and

RBC Capital Markets describes its lack of iron-ore exposure at a time of falling iron-ore price as placing it in a differentiated position.

Over the medium term, Deutsche Bank Research sees Glencore’s transition metals business as a driver of the re-rating of its shares, along with the company’s low reinvestment needs, deleveraging and other self-help catalysts.

Deutsche believes further that Glencore’s commitment to halve its coal asset base by 2035 and deplete it entirely by 2050 should resonate with shareholders seeking real action on climate change.

It describes Glencore’s copper business as being undervalued and foresees more problem assets being shown the door.

“Glencore continues to show compelling value,” RBC Capital Markets analysts state, and Morgan Stanley Research foresees coal’s market tightness enabling Glencore to generate significant cash and being well-placed to deliver outsized capital returns to shareholders.

By investing in operating manganese, bauxite and copper assets, the new Exxaro Minerals business could represent 50% of expected coal earnings within ten years, Exxaro CEO-designate and MD Minerals Dr Nombasa Tsengwa stated on the Johannesburg Stock Exchange-listed coal company’s website on Monday.

Exxaro outlined its strategy in response to climate change while hosting a virtual Capital Markets Day.

The expected earnings before interest, taxes, depreciation and amortisation percentage of commodities of 30% in phase 1 and 50% in phase 2 would exclude energy and ferrous metals, the company stated under the heading:“We aim to scale purposefully”.

The mission of the minerals business in manganese, bauxite and copper would be “to utilise Exxaro’s mining skills to supply minerals that power a cleaner world...and provide our shareholders with superior returns whilst driving decarbonisation ambitions”.

The company stated on its website that there was no better time to embark on its decarbonisation journey owing to its proven ability to outperform its value creation targets and its healthy position to leverage growth.

The company, headed by CEO Mxolisi Mgojo, has achieved an annual return on capital of 25% from 2016 to 2019 and an average debt-to-equity ratio of 9% over the same four years.

Its deep-rooted competencies from which to grow, the company stated, included its opencast mining and bulk commodity product experience in coal as well as base metals, mineral sands and industrial minerals experience.

Of the three minerals targeted to ‘power a cleaner world’, the company’s commodity prioritisation process had identified manganese, bauxite and copper as providing the best risk-reward ratio.

Describing manganese as providing “attractive opportunities in our own backyard”, Tsengwa outlined the impending two-million-tonne-a-year projected shortfall in manganese supply by 2035.

In copper, it would be targeting the consolidation of fragmented emerging participants to exploit attractive margins, with favourable entry points in the second and third quartile of the cost curve.

In bauxite, timing would be critical in a market that would have a 65-million-tonne supply gap by 2045 that China would no longer be able to bridge.

Merger and acquisition experience included Exxaro’s acquisition of Namakwa Sands, Total Coal, Black Mountain and Tata’s shareholding in the Cennergi renewable energy business to make it the 10% owner.

Iron-ore sank below $100/t as China’s moves to clean up its heavy-polluting industrial sector spurred a swift and brutal collapse.

Prices have more than halved since peaking in May as the world’s biggest steelmaker intensifies production curbs to meet a target for lower volumes this year, and a sharp downturn in China’s property sector hurts demand.

Iron ore’s slump makes it one of the worst-performing major commodities and a notable outlier in a broader boom that’s seen aluminum soar to a 13-year high, gas prices jump and coal futures surge to unprecedented levels.

A drop back to double-digits for the first time since July last year would be a relief for steel producers, but a blow to the world’s top miners that have enjoyed bumper profits during the first-half rally. It’s bad news too for top iron ore producer Australia, where the key steel-making ingredient generates about 40% of goods exports.

Iron-ore futures have slumped more than 20% this week and were trading at $99.55/t at 9:18 a.m. in New York.

Here’s more on iron ore’s collapse and how it may ripple through markets:

LOSING A DIGIT

It’s been a stark turnaround from the first half, when steelmakers ramped up output and economic optimism and stimulus aided consumption. The rally then faltered after China began cracking down on surging commodity prices, and the decline gathered pace as authorities rolled out more measures to reduce steel production and end-user sectors like property weakened.

Iron-ore’s deepening sell-off has seen volatility jump to the highest in five years, with UBS Group saying the decline “has played out faster than expected.” Inventories at ports are 10% higher than a year earlier and expectations for Chinese demand to soften further coincide with forecasts for global supplies to rise. UBS predicts prices will average $89 next year, a 12% cut to its previous forecast.

STEEL SURGE

It’s a different story for steel, where prices have stayed elevated. The market remains tight of supplies as China’s production cuts significantly outpace declining demand, according to Citigroup Inc. Spot rebar is near the highest since May, albeit 12% below that month’s high, and nationwide inventories have shrunk for eight weeks.

China has repeatedly urged steel mills to reduce output this year to curb carbon emissions. Now, winter curbs are looming to ensure blue skies for the Winter Olympics.

Measures are starting to take effect, with production dropping to the lowest in 17 months in August and declining in early September. Volumes need to fall 8.7% year-on-year in the final four months to achieve flat annual output, according to China International Capital Corp.

MAJOR MINERS

Iron-ore producers Rio Tinto Group, BHP Group, Vale SA and Fortescue Metals Group have seen their shares tumble. The drop in prices is likely to weigh on profit that had surged alongside the earlier jump.

The biggest producers are able to weather lower prices as their production costs can be less than $20 a ton, but smaller miners will be hit harder. Those operators tend to restart or ramp up production when the market rallies strongly, and processes such as having to truck ore from mines to ports make them more sensitive to price changes.

ECONOMIC HIT

Australia’s economy had been supported through the pandemic by surging iron ore export revenue. But the country’s growth is under increasing pressure from lockdowns in its two biggest cities and every $10 decline in the price of iron ore has a A$3-billion ($2.2-billion) to A$3.5 billion fiscal impact, according to Bloomberg Economics.

For China, iron-ore’s slump has come as authorities grapple with stemming a surge raw material costs that had stoked concerns that rising inflation would curtail growth.

Save the SA Smelters movement, which has thrown its full weight behind the decision of the Cabinet to impose an export tax on raw chrome leaving the country, on Friday responded to the analysis of Chrome SA that the imposition of such a tax would be high risk.

ChromeSA was formed late last year after the Cabinet announced that a chrome export tax was in the offing. But the tax has not yet been implemented.

“It is with great sadness that we note the recent article stating that the imposition of a chrome export tax would be high risk,” Save SA Smelters secretary Billy Mankgane stated in a release to Mining Weekly, in which he reiterated his movement’s call for the implementation of the tax.

“Here is our concern. ChromeSA also happens to be an organisation whose members are predominantly platinum producers,” stated Mankgane in drawing attention to platinum group metals (PGMs) mining companies producing chrome as a byproduct when mining upper group two (UG2) reef.

“The UG2 producers will produce UG2 as a byproduct with or without a tax as it is a necessary step in the production of PGMs,” Mankgane wrote in the Save the SA Smelters release. “The byproduct comes literally for free,” he said, adding that the UG2 price is less than R1 600/t free on board while the beneficiated ferrochrome price is close to R23 000/t, or 1 400% higher in value.

“Why are we allowing this low value, low contribution material to be dumped in China along with precious South African jobs,” he asked.

“Save SA Smelters is merely advocating for the implementation of South African policies which are meant to benefit our people here in South Africa,” Mankgane added.

As Mining Weekly has reported, five of South Africa’s ferrochrome smelters have either been shut down, liquidated or placed in business rescue. These smelters supported more than 31 000 jobs along with a yearly contribution of R11-billion to South Africa’s gross domestic product (GDP).

Direct employment lost in the past five years totals 1 139 jobs. Another 1 608 jobs are currently at risk under Section 189 of the Labour Relations Act, and remaining at risk are another 5 243 jobs.

Also supporting the imposition of a tax on the export of chrome ore are:

South Africa’s ferrochrome producing companies, which consume 8.2-million tonnes of chrome ore a year, employ 6 851 people directly, support 68 000 jobs overall, contribute R41-billion to South Africa’s GDP, pay R14-billion a year to Eskom, have pay-as-you-earn tax payments of R1.4-billion, buy 2.5-million tonnes of product a year from 20 South African reductant mines, and accord R42-million a year in social support and local enterprise development;

The 1 177-employee Tendele Coal Mining, along with another five South African anthracite producers, which collectively provide jobs for another 3 800 employees; and

The 1 500-employee Columbus Stainless of Mpumalanga, which produces stainless steel locally from the locally produced ferrochrome.

“As Save SA smelters, we once again acknowledge that the increase in electricity costs is an important issue and we have never shied away from this fact,” said Mankgane.

The ferrochrome industry is looking at possible production of 750 MW of energy generation made up of a mixture of on-site generation using offgas and Stirling engines or various types of equipment, possibly off-site wind and solar power, as well as virtual power purchase agreements involving also solar and wind being wheeled on to the national electricity grid.

This week, Mining Weekly Editor Martin Creamer unpacks West Wits Mining reviving a West Rand underground gold mine; the unexpected consequence that is causing South Africa’s junior mining dearth; Pan African's plans to reduce its reliance on Eskom for electricity.