Prolonging mining means technology, economies of scale and infrastructure

Mining is a sunset industry. No matter how deep we dig or how far we go, minerals are finite, and their extraction becomes more challenging every year. The Minerals Council SA has stated that over the past decade, multi-factor productivity in SA has fallen 7.6%. Mining output has declined 10% and minerals sales have contracted 11%.

However, though we know at some point we will run out of mineable resources, it is projected that there are still about $2.5-trillion of mineral resources in the country. No picture of SA’s future is complete without taking into account what mining can contribute to the economy. And harnessing technology is the only way we will be able to get the most out of our mining resources in ways that are efficient, effective, and responsible. 

To remain competitive, the SA mining industry will have to spend more on technological R&D, as it used to under the “mining house” system, when large mining groups had significant R&D budgets. Our current model is simply not sustainable. We will need new technologies to unlock the country’s remaining mineral wealth and this may include artificial intelligence and deep-level, remote mining, employing highly skilled operators rather than sending workers underground.

This is an emotional issue as the argument is often made that technology will replace employment, and in a country teetering on an unemployment rate of 30.8% this is not an insignificant consideration. Though one has great empathy for such a concern, it is not a question of choosing or rejecting technological advancement. Without it, some mineral resources cannot be mined at all, and for the rest it is important that mines remain competitive. Technology is the only answer to delaying the inevitable death of the industry when our mineral wealth runs out.

The question of labour should be framed differently when it comes to mining and the fourth industrial revolution (4IR), as we need to look at it from the perspective that technology is about preserving the mining sector in a new guise. We then move from predominantly manual labour to a higher reliance on technology with skilled operators, which is an important step to take for an industry that only recently started developing a social and labour responsibility mindset.

While it is a social, legal and ethical imperative for mining companies to invest in their people, the kind of scale of upskilling involved with 4IR is simply not achievable for smaller mining companies on their own. The complexity of such an education process starts well before employment at the mine commences. 

In the past two decades there have been many new entrants into the mining industry, with the deconcentration of mining efforts through various spin-offs into smaller operators, as well as the opening up of new mining right applications after the deconcentrating of mineral rights. Though the bulk of mining is still in the hands of majors, there are now more than 58 mining companies that are members of the Minerals Council.

Because these smaller companies do not have the economies of scale to invest in the radical upskilling of most of their staff, it is critical that the government starts thinking about what regulations will be helpful to ease the employment of highly skilled people in the development of the mining industry. But we need to act quickly. If we think about how speedy technological advancement has been over the past few years, we must not be slow on the uptake and lag behind in upskilling people.

The government could take a lead role here in co-ordinating the efforts of industry and private companies to ensure there will be suitably skilled individuals who can take up employment in the mining sector in the digital age. This requires considerable co-operation between all parties, including unions and bodies, such as the Minerals Council. If we are too slow, the mining industry’s sun will set in SA a lot quicker than it should.

Another factor is SA’s infrastructure challenges, primarily in terms of electricity. Demand is a major issue for the mining sector because of our electricity crisis, which casts a dark shadow over any development of industry in SA and the sustainability thereof. Renewables are critical, and there does seem to be a revived focus on this arena, but change is just not coming fast enough.

At last year’s Mining Indaba, mineral resources and energy minister Gwede Mantashe announced he would investigate how mines (and downstream beneficiation plants) could generate their own electricity. While it is encouraging that the government is developing strategies to permit private electricity generation, the capital costs thereof put this beyond the reach of small and medium mining operations.

A solution is to allow private electricity suppliers to be off the balance sheet of the mines and be financed independently. These companies should be given a licence to generate power so the mines would not need to build up capital for this. Another benefit would be that the electricity generation project would not be dependent on the life of the mine and would enhance our national grid when the mine stops taking the bulk of the power.

Infrastructure also becomes an issue when we talk about beneficiation, a key element of the future of mining, which goes hand in hand with discussions on technology. Beneficiation at a macroeconomic level creates wealth.

Almost a decade ago, in June 2011, the department of mineral resources and energy published a beneficiation strategy for the minerals industry. SA has been a resource economy for more than a century and requires a paradigm shift. We must focus on strategic investment in assets to maximise long-term growth beneficiation projects, enhance value exports, and increase sources for consumption of local content.

Unsurprisingly, the strategy identified the lack of infrastructure as one of the barriers to the development of downstream beneficiation. Shortages of critical infrastructure, such as rail, water, ports and electricity supply, would, according to the department, pose a major threat to future growth.

To lay the ground work for beneficiation we need to improve the efficiency and reliability of state-owned rail transport, address the electricity crisis, entice investment and focus on streamlining the regulatory approval process.

Technology in mining is not just a matter of mechanisation — there are labour and infrastructure issues that need immediate attention. The government should take the wheel here and help ensure there are available funds for mining companies to address labour upskilling, as well as electricity issues.

This is an industry we all want to last as long as possible, and the sector needs to revolutionise to remain relevant and sustainable.

• Badenhorst is a partner at Hogan Lovells Johannesburg.