SMALL– to medium-sized mining companies without the benefits of diverse income would be most heavily affected by the 21-day lockdown imposed by the South African government on March 27 to stem the spread of the COVID-19.
This is the view of Peter Major, mining director at Mergence Corporate Solutions who told Fin24 in an interview that companies with “weak or questionable foundations” would be “wiped out” by the effect of the lockdown.
“On the whole, it is the smaller mining companies who will be hardest hit by the 21-day lockdown,” Major told the online publication.
“Underground mines will suffer a lot too as leaving underground areas idle for more than a few weeks starts causing real problems. And unfortunately – it’s they that employ the most workers,” he said.
“No company wants to retrench. You only retrench when you’re losing money and going to go to zero. No one wants to go to zero,” he said.
Large companies and companies producing certain commodities such as coal, platinum, iron ore and manganese had a better chance of emerging from the lockdown, some relatively unscathed. These companies were accustomed to production interruptions owing to strikes and community foment, said Major.
The weaker rand also offers some protection, and with commodities being priced in dollars, South Africa stands to gain, said Fin24. The rand breached the R19/$ mark just days ago after Fitch downgraded the country’s debt further into junk status and has currently buoyed at the R18.30/$ level, it said.
“All mines can be profitable at this level and can even be profitable at R16-R17 [to the greenback],” said Major.
