SA mines to close for three weeks in Covid-19 battle
Mines say stringent measures are in place to protect employees from the coronavirus
The world's biggest source of platinum group metals, manganese, chrome and major contributor of gold is going into a three-week lockdown to slow the spread of Covid-19.
“Higher gold, platinum and palladium prices combined with a weaker rand were helping Sibanye-Stillwater and other miners but the effect of the virus will now cut profits due to fixed costs of operating mines,” SP Angel's John Meyer said in London.
President Cyril Ramaphosa said on Monday night that the lockdown would start at midnight on Thursday and last to April 16. Mines and furnaces will have to shut.
SA’s mines employ 450,000 people and support large numbers of supply and services businesses in SA.
Roger Baxter, CEO of the Minerals Council SA, whose members account for 90% of the country’s mineral production, said talks were under way to prevent unintended damage to the industry.
“The Minerals Council is also exploring what will be required to prevent the lockdown leading to permanent damage of the industry. There are marginal and loss-making mines that would likely be unable to reopen should they be required to close fully, without remedial measures,” he said in a statement on Tuesday.
“In addition to the measures announced by Ramaphosa, there are other creative solutions being explored, including by organised business as a whole, that could assist the survival and eventual recovery of the industry and the economy,” Baxter said.
These measures entail ensuring mines have sufficient staff and capital to make sure mines are adequately cared for during the lockdown so they can be quickly and safely reopened.
The platinum group metals (PGM) industry is dealing with a backlog of inventory that it has not smelted or refined, making this the ideal opportunity to process these already mined metals with relatively small staffing requirements.
PGM miners and companies in chrome, iron ore and manganese, for example, have supply contracts with customers. It’s likely they will have to trigger force majeure clauses in these contracts if they cannot deliver minerals because of the closures.
Harmony Gold, the largest producer of SA’s gold, said it is putting its mines into care and maintenance and the shutdown will negatively affect its 1.4-million ounce production target for 2020, as well as its earnings.
“This is an unprecedented time in the history of the mining industry and our country. The health and safety of all South Africans must take precedence and, as such, we are committed to making decisions that will ensure the continued viability of our company,” said Harmony CEO Peter Steenkamp.
AngloGold Ashanti said it was shutting its Mponeng mine, the world’s deepest at 4km below ground, and its tailings treatment business, which accounted for 419,000oz of gold in 2019. These assets will pass over to Harmony in a $300m deal that should be concluded at the end of June.
SA's underground mines in gold and platinum are the most difficult to keep idle and the cost and time to restart them after three weeks of closure is expensive and long.
“The very deep gold mines may suffer if working faces are left unworked for several weeks as the build-up of rock stresses at around 4km depth will be huge and it is possible that some of the faces may be irretrievable,” said Meyer.
“The lockdown could result in some major capital expenditure to reopen certain deep-level shafts if these faces are left unworked for more than a few weeks, serious for the likes of Sibanye and Harmony,” he said.
SA’s companies have attempted to keep their labour-intensive mines open, sending tens of thousands of people underground daily while facing reduced productivity and higher costs to keep their workers safe.
Mineral resources and energy minister Gwede Mantashe met industry executives on Tuesday to formulate plans around the shut downs, care and maintenance programmes, how to manage furnaces and refineries, which cannot be switched on and off for short periods, as well as what to do with tens of thousands of mineworkers.
“It is our understanding that South Africans are being ‘locked down’ where they are currently located. It is not desirable, we understand, for South Africans to be travelling across country, or into neighbouring countries. This is part of the current planning process,” said council spokesperson Charmane Russell when asked about sending mine employees home.
Globally, about 17,000 people have died and more than 390,000 have been diagnosed with the coronavirus, with more than 100,000 of these recovered (mostly in China), according to Johns Hopkins University in the US.