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South African miners map path to recovery amid debate over its golden future

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South African miners map path to recovery amid debate over its golden future

Theta Gold Mines Ltd. Chairman Bill Guy had a challenge spruiking his gold project at a conference on Sept. 6 right after Gold Fields Ltd. CEO Nick Holland said South Africa's gold sector is in decline, but such is the dichotomy facing an industry which is trying to rejuvenate through exploration across other commodities.

Minerals Council South Africa CEO Roger Baxter revealed plans at Africa Down Under in Perth, Australia, the following day to boost the country's proportion of global exploration spend from 1% in 2017 to 5%, and has formed eight commodity "leadership leadership forum" groups to develop a national greenfields exploration strategy.

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Minerals Council South Africa CEO Roger Baxter addresses
Africa Down Under Sept. 6, 2019.
Source: Paydirt Media/Bryan Charlton

In a subsequent interview, Baxter sympathized with Holland's assertion that South Africa's gold industry is "in decline" by noting its production has dropped from 1,000 tonnes in 1970, 77% of the world's new mined gold supply, to about 130 tonnes in 2018, and employment from 550,000 to just under 100,000.

Holland said that while Gold Fields' South Deep project will be successful one day, the company is now over 4 kilometers down in the Witwatersrand Basin, which means exponential geotechnical risks and "tremendous cost in trying to extract the gold and get it to surface ... and I don't think at this stage we have the techniques to do it."

Mining that far below ground also has safety implications. While South Deep is unique in that it has 20-meter to 30-meter-thick reef packages that are fairly flat dipping, other ore bodies are around 2 meters thick, dipping at 35 degrees, which makes it "impossible" to mechanize.

In an interview, Guy bemoaned that "everything is compared to the Wits," yet South Africa has some of the world's largest geological features and its potential is yet to be properly tested.

A prime example is the Sabie-Pilgrims Rest Goldfield, discovered about 130 years ago, which hosts Theta's namesake project, about 300 kilometers northeast of the Witwatersrand Basin, which has shallow gold from surface to 130 meters for its open cut project.

"As an exploration geologist, I just find it very hard to classify South Africa as 'the Wits,' and that's the end of it. It's like saying Kalgoorlie is the end of all gold in Western Australia. That's not true," he said. "I'd hate to write off a country which is really working very hard to improve itself and is relatively underexplored."

While about 53,000 tonnes of gold has been mined from the Witwatersrand Basin — just under 30% of all gold mined in human history — since the 1880s, Baxter said it is still nearly South Africa's biggest export earner behind only platinum, followed by coal and iron ore. Its reserves are listed below.

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Baxter was also confident that its gold sector "isn't going to fade away ... [though] we could do more to sustain it," plus other commodities, which he is working on boosting through initiatives to promote exploration.

On that front, Baxter said MCSA has made "good progress" through some "tough" but productive conversations with Minister of Mineral Resources and Energy Gwede Mantashe, a former trade unionist who had earlier told delegates Sept. 4 that South Africa has US$2.5 trillion worth of mineral wealth still in situ.

This was in stark contrast to the 2018 Africa Down Under conference when Baxter declared MSCA had "lost confidence" in previous minister Mosebenzi Joseph Zwane's ability to lead his department.

A major challenge ahead for MCSA is working towards less disruption to mining from communities, and it is working with government and communities to this end, while industrial relations stability and "workable" outcomes to negotiations is also a top priority going forward.

Guy has noticed "dramatic" regulatory improvements since Cyril Ramaphosa became leader of the governing African National Congress in 2017, while Baxter said the commodity forum discussions with Mantashe have been "the most constructive thing that's taken place in mining in South Africa for the last decade."

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South Africa Minister Gwede Mantashe addresses
Africa Down Under
Sept 5, 2019.
Source: Paydirt Media/Bryan Charlton

Since Mantashe's re-appointment as mines minister shortly after Ramaphosa was elected president in May, the Department of Mineral Resources and Energy has been tackling license backlogs and investigating corruption, Baxter said.

One focus of the commodity forums with Mantashe is manganese, which South Africa has 28.9% of global reserves but 80% of the world's high-grade manganese, accounting for 40% of global supply.

The key focus of manganese discussions is around accessing low-cost, highly efficient rail, because at the moment it travels on general freight lines down to the Eastern Cape at three times the running cost per kilometer versus the heavy haul Sishen-Saldanha line.

"If we can get more manganese on that line, we'd become a much more significant market maker in the manganese space," Baxter said, which would also help its cause against competitors Australia and China.