[miningmx.com] — CLEANING up South Africa’s scandal-tainted mining sector is no easy task but a six-month government audit of existing mineral licences is a welcome start, the head of the world’s third-largest gold miner said.
“There’s been a lot of good work,” AngloGold Ashanti CEO Mark Cutifani Mark Cutifani told Reuters in an interview. “There is a lot of work that needs to be done.”
Mines minister Susan Shabangu acknowledged a crisis in the industry in August after damaging mineral rights disputes between global mining companies and little-heard of black investment firms.
After imposing a six-month moratorium on new mining rights applications from September, a government audit has unearthed “disturbing” problems ranging from bribery and illegal drilling to overlapping claims and rights sold without permission.
Despite criticism of the government for letting the problems take root, Cutifani, an Australian, said South Africa still ranked among the top five countries for mining firms to work, mainly because of a mining tradition dating back to the 1880s.
“It’s still one of the best jurisdictions to operate in,” he said, citing Canada, Brazil and Colombia as rivals. Australia had slipped behind the world’s biggest platinum producer because of a planned minerals windfall tax, he added.
“Not all that many countries listen to the mining industry but in South Africa, we get listened to,” said Cutifani, a 34-year industry veteran. “We have access to the people we need to have access to and they have been very supportive.”
RIDICULOUS NOTIONS
He also said the current public debate on mining nationalisation would expose it as a “ridiculous notion”.
“There is not one successful example of mining nationalisation across the industry. There are a number of examples of successfully run state-owned mining companies. These are two entirely different things,” he said.
The main miners’ union said this month nationalisation as proposed by the ANC’s Youth League was a reckless, ill-conceived idea that would not come to fruition.
Many foreign investors are wary of the power of South Africa’s unions – a legacy of their key role in the struggle against apartheid – but Cutifani said he found the labour movement to be tough but reasonable negotiators.
“They understand the business, they understand the need to negotiate as hard as they can for the members but at the same time not threaten the viability of the business,” he said.
However, rapidly rising electricity prices were a concern, he said, with power utility Eskom possibly demanding two additional tariff hikes on top of the three 25% annual increases it has already been granted.
The extra costs would be likely to hit a drive towards “beneficiation” – refining and processing minerals and exporting manufactured products rather than simply shipping raw ore – that forms part of the government’s plans to tackle 25% unemployment.
“For us to be successful in beneficiation, we are going to need competitive energy rates,” he said.
AngloGold is on track to produce 4.5 million ounces of gold this year and to increase that to 5.5 million over five years.
Cutifani forecast gold at a relatively conservative $1,300 an ounce next year, but said it could head to $1,500 “depending on what happens with investment”.
