09 Feb SA mining firms battling to beat new challenges
IAN Farmer, head of Lonmin plc, the world’s third-largest platinum producer, says operating in South Africa has become more and more challenging. Speaking at the Mining Indaba in Cape Town yesterday Farmer said major issues included safety, escalating costs related to managing labour, skills shortages, transformation and equity ownership and increased social pressure due to rising expectations of the local communities.
Other challenges he cited were resource nationalisation and power issues, which, he noted, Eskom was working hard to address.
He said he did not see a repeat of the Eskom power disruptions of 2008.
He said the reliability of supply of platinum group metals (PGMs) globally was critical due to their niche applications and there was a heightened risk of supply disruptions from South Africa.
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He said a PGM miner’s ability to successfully manage these challenges would determine its relative performance.
While the medium- to long-term prospects for the industry were good, the company had to manage the global challenges and the South African operating environment, he said.
Dow Jones Newswires reported earlier this week that Lonmin had said that in the past four months it had lost R100-million a month of revenue as a result of government-mandated work stoppages at its South African platinum mines.
Farmer noted that due to section 54 work stoppages, the company had lost 177000 tons in production in the year just ended.
The costs of operating were higher and prices were under pressure. The group was investing in three new generation shift which would take it down the cost curve.
Arjen de Bruin, operations solutions managing director at OIM, said addressing low productivity levels, which were costing the local mining industry billions of rands every year in lost revenue, was critical if South Africa was to capitalise on the opportunities global resources currently presented.
De Bruin said productivity in South Africa’s mining industry was being negatively affected by poor safety practices, high staff absenteeism, equipment breakdown, poor equipment maintenance and a shortage of skilled staff.
“Addressing these issues for sustained productivity requires South African mining houses to enforce a carefully structured production management framework that monitors and maintains high productivity levels, reduces costs and maximises available resources,” he said.
The financial rewards for doing this could be significant.
“For example, a local mine we have worked with in implementing such a framework has experienced increased revenue of R469-million over a seven-month period, largely as a result of an improvement in productivity levels.”
De Bruin said a major barrier to South Africa’s mining productivity was safety standards on mines.