JOHANNESBURG - South African mining
companies are bracing for a heavy hit from the country's looming
nationwide lockdown to slow the spread of the coronavirus,
warning of an expected leap in costs in addition to their lost
output.
A leading producer of metals and minerals such as platinum,
palladium, coal, gold and iron ore, South Africa's
labour-intensive mining industry is a potential hotbed of
infection among the thousands of miners who often work in
confined spaces, with some living nearby in cramped
accommodation.
President Cyril Ramaphosa on Monday imposed a 21-day
lockdown from midnight on Thursday after a surge in coronavirus
cases.
Furnaces and underground mines will have to be put on care
and maintenance, which means operations would stop but are kept
in a condition to reopen in future.
"The lockdown could result in some major capital expenditure
to reopen certain deep-level shafts," said SP Angel mining
analyst Johan Meyer.
South Africa's Minerals Council said it was exploring what
would be required to prevent permanent damage of the sector.
"There are marginal and loss-making mines that would likely
be unable to reopen should they be required to close fully,
without remedial measures," it said.
AngloGold Ashanti, owner of Mponeng - the world's
deepest mine - said it was developing plans to restore
production safely. The gold miner has already suspended
production at its Cerro Vanguardia mine in Argentina.
Pan African Resources said it has sufficient
liquidity but would look to reschedule its short-term senior
debt obligations in the event the lockdown extends into a
prolonged period.
PRODUCTION HIT
Harmony Gold said the shutdown would "negatively
impact" its annual production guidance of 1.4 million ounces and
its full-year earnings.
"This is an unprecedented time in the history of the mining
industry and our country," said Chief Executive Peter Steenkamp.
South32 also said it would withdraw its full-year
guidance for South African operations, which include thermal
coal, aluminum, manganese and a smelter.
Impala Platinum said it was planning an orderly
transition to care-and-maintenance status at its mining,
smelting and refining operations while also working on an
analysis of the impact.
"These are unprecedented and extraordinary times and we all
need to make sacrifices for the greater good," said Impala CEO
Nico Muller.
Sibanye Stillwater, the world's largest primary
producer of platinum, and Anglo American Platinum said
they would comply with government measures but could not comment
further at this stage.
While miners try to quantify the financial impact from the
crisis, the South Africa's mining minister is meeting mining and
energy executives on Tuesday to consider how to execute the
lockdown.
Palladium prices surged as much as 12.7% on Tuesday
for the biggest daily gain since 2000, spurred partly by
concerns over supply. Spot gold and platinum also
rose sharply.
"The country accounts for some 70% of global platinum mined
supply and 35% of palladium, with a 21-day lockdown possibly
resulting in a 4% and 2% of 2020 supply reduction," said Dmitry
Glushakov, head of metals and mining research at VTB Capital.
"We believe that this might provide significant support to
PGM (platinum group metals) prices in the short term."
Additional reporting Alexander Winning in Johannesburg and
Peter Hobson in London.