Background Information

Mineralogy in South Africa

South Africa is the world's biggest producer of platinum, and one of the leading producers of gold, diamonds, base metals and coal.

South Africa holds the world's largest natural reserves of gold, platinum-group metals, chrome ore and manganese ore, and the second-largest reserves of zirconium, vanadium and titanium.

At the same time, there is considerable potential for the discovery of other world-class deposits in areas yet to be exhaustively explored.

The sector spans the full spectrum of the five major mineral categories - namely precious metals and minerals, energy minerals, non-ferrous metals and minerals, ferrous minerals, and industrial minerals.

Apart from its prolific mineral reserves, South Africa's strengths include an extremely high level of technical and production expertise, and comprehensive research and development activities.

The country has world-scale primary processing facilities covering carbon steel, stainless steel and aluminium, in addition to gold and platinum. It is also a world leader of new technologies, such as a ground-breaking process that converts low-grade superfine iron ore into high-quality iron units.

Contribution to the economy

With the growth of South Africa's secondary and tertiary industries, the relative contribution of mining to South Africa's gross domestic product (GDP) has declined over the past 10-20 years.
Nonetheless, the industry is continually adapting to changing local and international world conditions, and remains a cornerstone of the economy, making a significant contribution to economic activity, job creation and foreign exchange earnings.

The sector accounts for roughly one-third of the market capitalisation of the JSE, and continues to act as a magnet for foreign investment in the country. In 2009, according to the Chamber of Mines of South Africa, the industry contributed:

8.8% directly, and another 10% indirectly, to the country's gross domestic product (GDP).
Over 50% of merchandise exports, if secondary beneficiated mineral exports are counted.
About 1-million jobs (500 000 directly).
About 18% of gross investment (10% directly).
Approximately 30% of capital inflows into the economy via the financial account of the balance of payments.
93% of the country's electricity generating capacity.
About 30% of the country's liquid fuel supply.
Between 10% and 20% of direct corporate tax receipts (together worth R10.5-billion).
In 2009, South Africa's mining industry was the largest contributor by value to black economic empowerment (BEE) in the economy, in terms of the value of BEE transactions completed.

Minerals beneficiation

For over 130 years, South Africa's mining industry has provided the critical mass for the development of a number of other world-class industries - energy, financial services, water services, engineering services, specialist seismic, geological and metallurgical services - that either supply the mining sector or use its products.

Not only does the mining sector use considerable services and inputs from the domestic economy, it also supplies many associated industries that use mining products to keep the wheels of the South African economy moving.
For example, 98% of the country's cement and more than 90% of the country's steel is fabricated locally from locally produced minerals.

Lucrative opportunities exist for further downstream processing and adding value locally to iron, carbon steel, stainless steel, aluminium, platinum group metals and gold. And a wide range of materials is available for jewellery - including gold, platinum, diamonds, tiger's eye and a variety of other semi-precious stones.

The government has targeted the downstream or beneficiated minerals industry as a growth sector, and where the commercial opportunities exist, downstream beneficiation is already taking place.

In 2009, the Chamber of Mines estimated that around R200-billion in value was added to the local economy through the intermediate and final product industries that use minerals produced by South Africa's mines.

Mineral sales and exports

In 2009, coal became the largest component of South Africa's mining industry by sales value, with total sales of R65.4-billion, followed by platinum group metals at R58-billion and gold at R49-billion - the top three minerals accounting for 71.2% of total mineral sales. Most commodity prices declined in 2009 due to the impact of the global financial crisis, which led to production declines for most minerals, resulting in the value of South African mineral sales falling by 19.6% to R241.3-billion.

South African mining companies, like most of their international peers, responded to the crisis by cutting back on supply and closing uneconomic production, which saw total South African mining production falling by 6.6% in 2009. According to the Chamber of Mines, the decline in mineral sales was driven by the decline in sales of manganese (down 67.8%), platinum group metals (down 36.7%) and coal (down 9.8%).

While total primary mineral exports sales fell by 19.7% to R176.4-billion in 2009, they still accounted for 31.7% of South Africa's total merchandise exports. And the addition of exports of secondary beneficiated minerals - such as catalytic converters, ferro-alloys, steel, chemicals and plastics - took the exports of the country's "mineral complex" to about R280-billion, or about 50% of South Africa's total merchandise exports, in 2009.

Rise of the junior mining sector

The junior mining sector in South Africa was born of new legislation in the form of the Mining and Petroleum Resources Development Act of 2006. The law enforced a "use it or lose it" principle, stipulating that mining rights not used by mining companies to exploit minerals in the ground would revert back to the state.

The legislation gave rise to the development of the junior mining sector in South Africa. Unused mining rights held by mining groups, but not used for years, were awarded to newly established junior companies that often showed themselves to be true mining entrepreneurs.

The advent of the legislation saw the launch in the same year of the Nedbank South Africa Junior Mining and Exploration Index, an instrument tracking the performance of junior miners operating in South Africa. The index aimed to raise the profile of the sector that had been dominated by major mining houses for more than a century.

The dominance of the majors - including BHP Billiton, Anglo American, Impala Platinum, Anglogold Ashanti, Anglo Platinum, Goldfields, Sasol, Harmony and Kumba - is still reflected in the resources sector of the JSE. The top 13 companies by size constitute over 95% of the total market capitalisation of all listed mining companies.

The Junior Mining and Exploration Index, comprising 38 mid- and small-cap miners such as Aquarius Platinum, Uranium One, Wesizwe, Platmin and Great Basin Gold, reached a market capitalisation high of R130 395 602 (about US$18.3-million) on 6 March 2008 and, following the global financial crisis, a low R43 555 730 (about $6.1-million) on 3 February 2009. However, the index recovered from the low of 931.89 points on 21 November 2008, soaring to 1 602.28 on 15 September 2010, pointing to a steady recovery in the smaller sector.

Sources:

Chamber of Mines of South Africa
Department of Minerals and Energy
Department of Trade and Industry
South Africa Yearbook