[miningmx.com] — DRDGOLD CEO Niel Pretorius on Thursday gave an impassioned and forthright assessment of how exorbitant input costs, regulatory uncertainty and talk of nationalisation were hurting South Africa’s mining industry.
Delivering the group’s results for the quarter to end-September, Pretorius said the time has come for the industry to have serious and honest discussions with the various state entities involved in the sector.
Referring to Eskom’s winter tariff levied on miners, Pretorius said he has yet to be presented with a compelling argument on the value miners receive for the surcharge.
DRDGOLD, had to pay R27.8m more for electricity during the three months, eroding the group’s operating profit significantly from R91.5m for the June quarter to R69.4m (a 24% decrease).
“It (the tariff) is in exchange for Eskom holding aside adequate power for the mines. Now whether that is an honest or truthfull promise on which one can rely from an operational point of view I’m not sure, because we don’t have a guarantee. For a company like ours, that (R27m) is a lot.’
He dismissed the notion that the strong rand is a serious threat to miners, saying the current margin at some of DRDGOLD’s projects were higher than what gold was sold for less than five years ago.
“I think we should be honest with ourselves, the gold price of today is a very good gold price. Our currency is not the main problem . the main problem is these discretionary and low-value adjustments we have to pay for supplies and services,” he said.
“It also has lot more to do with our indifference to the work calender, the multitude of public holidays and how they are positioned. Those other countries against whom we compete, when a holiday falls on a Wednesday, the day off moves to the Friday. We insist (on keeping) the holiday in the middle of the week and as a consequence a large part of the week’s production gets lost.’
He added that administrative officials such as mining inspectors, are not given solid parameters on how to go about their work, leading to discretionary decisions that may have serious implications.
RESPONSIBLE ENGAGEMENT
“I think the time has come that we have to, in a responsible way, engage those entities, those government institutions and those parastatals that impact our lives.
“What we have to do is stand up and tell the truth, saying that what you are doing is hurting the industry. It is hurting in the sense that we’re not achieving the margin our competitors are achieving; we’re not achieving the return on capital our competitors are achieving and we’re not giving investors the long-term comfort they want,’ he said.
Pretorius said South Africa should wake up to the fact that its investment environment is not matching those of competitors, notably in South America.
“If you have $100m to invest somewhere, where would you go?’ he asked. “There are various jurisdictions opening up all over the world where you don’t have . discussions on politically defunt concepts that have been tried and tested and abandoned.
“The frustration for me is having to witness how South Africa’s (mining industry) have shrunk, while others have really boomed. The only difference was that investors were prepared to take their money to those booming jurisdictions.’
He said countries which manage to attract more capital to their mining operations succeeded in creating openness, transparency and certainty.
“Investors are flocking there, and those countries are benefitting from it,’ he said.
“We can’t have this ambigious waffling about issues, one has to tell the world where you stand.’
