South African mining companies have experienced a downturn in performance and shareholder returns over the past year, according to a report titled ‘2023 SA Mine: Adapt to thrive’ released by PwC South Africa. The decline from peak levels observed in the post-Covid-19 economic revival is attributed to industry-wide changes, such as infrastructural challenges, fluctuations in mineral prices, and rising operational costs.
Andries Rossouw, PwC Africa Energy, Utilities and Resources leader, commented, “The combination of these dynamics has led to a dip in profits and operational cash flows for mining entities in South Africa. Yet, robust balance sheets have allowed miners to channel investments into their operations and disburse dividends.”
The report highlights a 5% revenue decline in rand terms from June 2022 to June 2023. Platinum group metals (PGMs) have been the predominant revenue driver, with coal trailing behind. However, PGM revenues saw a 33% decrease, with iron-ore dropping by 22% and coal by 12%. Conversely, chrome revenues climbed by 38%.
The challenges that PGM producers face include issues related to feed, yield, and pressured PGM prices. Moreover, South Africa’s persistent power shortages have hampered the mining industry’s ability to sustain previous production levels, resulting in a 5.4% year-on-year decline.
The industry’s total market capitalization shrank from R1.31 billion as of June 30, 2022, to R1.09 billion, mainly due to declining market capitalizations in the coal and PGM sectors.
During a virtual briefing on October 3, Rossouw explained that the weak rand had boosted mining revenues. Still, it also inflated the input costs of essential chemicals, materials, and operational equipment. Furthermore, excluding metal purchases, operating expenses surged by 11%, highlighting above-average hikes in energy, chemicals, and labor costs.
Vuyiswa Khutlang, PwC South Africa Energy, Utilities and Resources partner, voiced concerns over the sustainability of mining operations. Yet, she emphasized South Africa’s potential role in the global decarbonization initiative, given its rich reserves of essential minerals.
The report underscores the urgency for global carbon neutrality and pinpoints minerals like copper, PGMs, lithium, nickel, cobalt, and rare earths as pivotal. This surge in demand presents an opportunity for Southern Africa to diversify global supplies while bolstering its economy.
Khutlang also touched upon the dwindling mineral reserves, emphasizing the necessity for strategic planning to protect mining-dependent communities. According to a report by Mining Weekly, she urged for community transition, employee reskilling, and mine rehabilitation.
Other report insights highlighted collaboration needs, regulatory environment standards, and the significance of capitalizing on growth opportunities amidst economic uncertainties.
