Despite rising costs and policy uncertainty hampering SA’s mining sector, the JSE’s mining index has made a spectacular comeback, and outperformed the all share index for the first time in a decade.
For the first time since 2008, the mining index outperformed the all share in the 12 months to end-June, said PwC partner Andries Rossouw.
"Hopefully it’s a sign of what’s to come in future," Rossouw said at the release of the firm’s "SA Mine 2018" report on Tuesday.
In the 10th edition of the report, 31 mining companies were surveyed and a "mixed bag" of fortunes was found for the industry in 2018.
The year was a challenging one for SA mining, said PwC’s leader on Africa energy, utilities and resources, Michal Kotzé.
Overall, however, the sector recorded an improvement as bulk commodities offset continued underperformance from precious metals, which dominate the local mining industry. Revenue for the year ended June rose 8% to R28bn, with coal mining being the largest revenue generator.
Dividends increased from R6bn to R16bn, the report found. Capital expenditure increased 19%, off a ten-year low, and the cumulative market valuation of mining companies surveyed grew 15% to R482bn, although this was largely driven by Kumba Iron Ore, PwC said.
However, a writedown of R200bn in assets demonstrated the difficulties many mines have experienced because of lower commodity prices, paired with the growing costs and a challenging operating environment in the country.
Last week’s gazetting of the Mining Charter is a move in the right direction, but it remains to be seen whether business and the government can work more effectively towards a more stable SA mining environment, PwC said.
Asked how PwC’s mining clients had reacted to the latest iteration of the charter, Kotzé said: "There will be points that are challenged."
The Minerals Council SA, which represents mining houses, has not yet commented on the policy.
Rossouw said there are a number of sticking points. A proposed "free carried interest", for example, in which a 10% shareholding will be split between employees and communities, is now just called a "carried interest", but it is not clear how this will be funded.
The charter is also silent on prospecting rights. "With limited available funding globally for exploration and prospecting, having a lack of certainty could result in alternative options receiving the go-ahead rather than projects where there is less certainty around the regulatory environment," Kotzé said.
It is expected that more detail will be forthcoming in implementation guidelines to accompany the charter, which the government aims to have drafted and gazetted before the end of November.