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SA mining’s sterling year

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Growing global demand saw the coal price reaching record levels this year. Image credit: Leon Louw for WhyAfrica

SA mining’s sterling year

South Africa’s mining sector delivered a sterling performance in the past year, despite several local and global challenges, and all stakeholders received much-welcomed value.

An analysis of these results and other factors including the economic context, infrastructure-related challenges in the sector, and industry and market analysis are explored in more detail in PwC’s newly launched SA Mine 2022 report.

SA mining’s sterling year

The industry’s financial performance exceeded expectations on most fronts. Distributions to shareholders more than doubled to R190bn, Capital expenditure grew by 36% and taxes paid increased by 14% as South African mining companies in aggregate maintained profitability at last year’s high levels. Growing demand for commodities in the sector saw record rand prices for the platinum group metals basket, iron ore, and coal, while most other South African commodity prices remained at relatively high rand levels.

A global low-carbon energy agenda remains a key focus, and this is anticipated to result in increased demand for a number of commodities in the medium to long term. Global constraints in supply of these commodities will mean increased prices and a need for investment in supply. When looking at a ‘just transition’ away from fossil fuels, the pace of this is likely to be limited by the availability of resources needed for the transition. Here, understanding the supply constraints will be key to mapping a realistic transition for the future.

According to Andries Rossouw, PwC’s Africa Energy, Utilities and Resources Leader South Africa stand to benefit from the demand growth, but whether South Africa and other resource-rich countries will benefit to the full extent will depend on their ability to address bottlenecks in supply and mine-to-market infrastructure.

“There is an obvious need to invest in the right skills, infrastructure, energy and water, and in general, creating an enabling environment for exploration, mine development, production and sales. Realising the full potential benefit of our resources and creating long-term sustainable outcomes will depend on our ability to mine cost competitively and to integrate various value chains profitably,” says Rossouw.

A cleaner, greener mining sector

When considering the volume of CO2 emitted in South Africa annually, the mining sector is a major contributor to these emissions albeit almost negligible in the global context. In 2021, up to 81.4% of South Africa’s electricity was generated from coal and considering that up to 60% of the energy used in the mining sector comes from electricity, issues of decarbonising as well as sustainable and reliable power supply are directly connected. Rossouw says that addressing these dual challenges will require the mining sector to make major investments into alternative and renewable energy sources and energy planning.

The global energy transition won’t be smooth, as was reflected in the record coal prices experienced for the year. As a coal export producer, it is essential that South Africa maximise the value obtained from its coal, through supporting global energy supply stability in these times of energy volatility.

Our report details the significant opportunity that exists for the mining sector to contribute to stable electricity supply, while meeting the growing pressures of ESG (Environmental, Social and Governance) and a low-carbon economy. Such investments are not only best practice but are also considered viable and commercially attractive.

SA mining’s sterling year

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SA mining’s sterling year 

 

 

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AgricultureEnvironmental Management & Climate ChangeEnergyESGInfrastructureMiningPolitical EconomyTourism and ConservationWater Management