THE BOTTOM LINE
Manganese, iron ore, chrome: Who needs gold and platinum?
PwC’s SA Mine report makes grim reading for precious metals, but brighter news for bulk commodities
The latest report from PwC on SA’s mining sector shows why investors are leery about putting their money into the industry.
According to the PwC’s SA Mine report, shareholder dividends have fallen to 6% of value distributed by 31 mining companies surveyed. While this is a recovery from the 2017 low of just 2%, it is a far cry from the 11% shareholders received in 2014.
The value received by a diminishing number of employees has risen to 47% from 37% in 2014, while direct taxes absorbed 12% from 9% over the same period.
Mining companies have in the past three years increased their funds reinvested, rising from 20% of value distribution in 2016 to 29% in 2018. Again this is far from the 33% of 2014 and 36% of 2015.
Put simply, mining companies are not investing enough in their futures as they face increased demands on their cash. Investment decisions have been curtailed by regulatory uncertainty in SA, a two-year debacle under the leadership of Mosebenzi Zwane as mineral resources minister, and a troubled labour environment.
For the gold and platinum mines this is playing out with job cuts, shaft closures and few new projects. As PwC points out, gold and platinum producers were the largest element within the R482bn mining company market capitalisation. However, their capitalisations fell by 4% and 5% respectively.
Of SA’s mineral output, it was the bulk commodities that have shown consistent growth over the past 15 years, PwC noted, with manganese, iron ore and chrome, the ingredients needed by China’s steel industry, the standout performers.