Friday , July 12 2024

Illegal mining stick with SA amid financial turnaround

PwC SA’s latest mining report on the country has revealed that the value of illegal mining and dealing of metals and diamonds in South Africa is estimated to be more than R7 billion per year.

Researchers from the firm suggest that gold sector has been the most adversely impacted by illegal mining.

“The Chamber of Mines has emphasized the need for mining houses, the DMR and the South African Police Service to work together at every level of illegal mining activity from individuals working underground to the large syndicates that organise activity and sell the end product,” reads part of the report.

The report notes that 2017 was another challenging year for South Africa’s mining industry in light of a decrease in dividends and market capitalisation, various retrenchments across the industry, and marginal increases in taxes paid.

However, spot price increases for bulk commodities supported the industry and resulted in a return to profitability after the first substantial increase in revenues in five years.

“After the price lows of December 2015 and January 2016, the current year saw USD prices recover for most commodities with the exception of platinum.

Although some USD price gains were offset by a stronger rand, the improved prices did bring the industry as a whole back into profitability,” said Michal Kotzé, PwC Africa Energy Utilities & Resources Leader.

Revenue increased by 13% (R43 billion) from the prior year. “It is notable that this is the first substantial increase in more than five years,” says Andries Rossouw, PwC Assurance Partner.

The gold companies’ revenue increased by 17% (R23 billion) due to improvements in USD gold prices and a weaker rand for most of the reporting period.

The platinum companies have seen revenue increases by 4% from the prior year on the back of improved platinum prices for parts of the year.

Operating expenses increased by R13 billion, which is a 5% increase from the prior year.

Continued low commodity prices have resulted in another year with significant impairments in the industry, with a total of R22 billion in impairment provisions.

More than R100 billion was impaired over the last three years, more than wiping out the last two years of capital expenditure in the industry.

“After last year’s net loss the companies in this year’s analysis are back into a net profit position due to lower impairments.”

Kotze said despite an improvement in the financial performance of the industry, regulatory announcements in June 2017 resulted in market capitalisation dropping to June 2015 levels.

PwC says a subsequent recovery at the end of August was aided by improved USD prices and hope by investors that the suspended new Mining Charter would be revised before final implementation.

Meanwhile PwC notes that the mining industry continues to add value to all its stakeholders.

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