Ministry of Mineral Resources
Private Bag X59
Pretoria
0001
Tel: 012 444 3999 / 021 462 2310
Fax: 012 444 3145 / 021 461 0859
Dear Minister,
Following my various correspondence to you on similar matters I write in emphasis thereof.
Much of the challenges afflicting the South African platinum (PGM) mining sectors are structural and global by nature.
As an explorer our woes are even greater than those of the producers as we had no ability to bank any rainy day income to shore up this devastating time.
Many of the explorers are not going to meet targeted exploration due to limited or non-availability of market to fund these prospects as a result at first the 2008 global economic crisis and now recently the platinum misread fundamentals.
Whilst in the past, a higher price was achieved for our country’s precious metals; in today’s global market the cyclicality of the commodities markets and volatility of foreign currencies have confluence to make our industry’s long term future look rather bleak. Unless urgent and material remedial actions are taken by both government and private sector, in particular the investment and financial service industry, high value down-stream manufactures within industrial sectors such as the automotive industry, jewellery and others will suffer as well, and the mining of this precious resource will diminish overtime with the result that due benefits for the country and its people will not be achieved maximally.
Our sector, the junior sector, employs hundreds and feeds into the employment of many thousands in the fields of exploration drilling labour and professional expertise. Importantly, the junior sector attracts foreign direct investment in billions of rand.
The government and in particular your department would need to lead the way forward by introducing a greater number of constructive interventions, where government induction of beneficial legislative framework would result in greater ore extraction and the protection of value for the investors and entrepreneurs who are at the “coal face” of challenging realities affecting their mining of platinum and PGMs.
The call for such interventions are not designed to give the sector an undue protection, nor to artificially sustain an unviable industry, but rather to nurture and protect an industry in its adolescence and ensure that it becomes a viable and sustainable industry sector that can hold its own in an uncertain world affected by socio-political and economic vagaries.
It is not suggested to bring about changes that would result in any confrontation with other countries, nor which would cause South Africa to renege or transgress bilateral and multilateral agreements, but rather use internal structures and resources available to the state and its organs to bring about a measure of stability through using and or introducing a set of tools and products which would ultimately reduce the volatility of this sought after metal and successfully maintain this for the long term.
In the main, interventions that can improve the value retained (profits) by both miners of platinum and PGMs, as well downstream value-add manufactures would be the ones with the highest priority for deployment.
South Africa’s already fragile platinum and PGM mining sector could be further damaged should proposals contained in a report commissioned by the African National Congress (ANC) into the state’s role in the minerals sector take effect and many of my peers and myself believe that we need an urgent mining Indaba to deal with the sector’s woes and to produce the required remedial government interventions.
State Intervention in the Minerals Sector (Sims) report suggests export tariffs on platinum sales — except where trade agreements prevent this — capping the price at which the metal may be sold to domestic users, that the metal be subject to exchange controls as gold is, and that SA use its position as the world’s dominant supplier to negotiate supply and beneficiation deals with customers.
This letter is to request your government to take immediate steps towards addressing new initiatives to spur the platinum sector on and to suggest a few remedies.
Thus the following are some suggestions I would like to propose for your ministry to take under consideration and possible action.
1. The major issue in investment is security of tenure, with no funding in the market; it will go a long way if Government could immediately announce that junior explorers with prospecting rights will be receiving further security of tenure to encourage investment in the sector.
1.1 Extending the mining and prospecting rights across the board for all companies in the platinum sector in particular those rights due for renewal within 24 months. This will remove investor jitters and secure the long term investment nature of mining as an investment class. The minister could do this in terms of her powers.
2. When gold went through similar woes in the 1960’s, to help market it a Kruger Rand was minted in 1967. This went a long way in firming up gold as an investment storer and a coin of choice for collectors. By 1980, the Kruger Rand accounted for about 80% of all gold mined for coining. We can replicate this with even a Greater man.
2.1 Introducing a Mandela Rand (like the Kruger coin) for platinum to push long term demand for the metal as a wealth store and safe haven, and let them coincide with the Mandela bank notes. If the Kruger Rand did magic during the gold slump only a less imaginative mind will fail to see the Mandela Rand doing triple that.
The Mandela Rand - Platinum
With their longer term fundamentals and the constant worry of gold overheating it cannot be farfetched for me to think platinum could help maintain the bank’s safety on a longer term basis.
Since 1925, the bank has held gold. Times have changed and continue to change. Do we also hold Euros? What about platinum?
The bank’s market department ought to be required to analyse and come up with a study to look into the effects short and long range of the bank starting to hold platinum refined troy ounces and how this could impact the market. The confidence South Africa shows in the metal and how this could be exported as an idea to BRICS so their own Reserve Banks consider this diversification.
South Africa economy requires we make platinum a hero at home first before anyone else could take it that serious in long range goals.
3.1 Propose that the Reserve Bank of South Africa considers including platinum in its reserves diversity. The Reserve Bank should buy at least 1m/oz in tranches over the next three years to add to the 4m/oz gold the bank currently holds. An announcement alone will push the price to levels capable of generating immediate (25 000) jobs based on projects that could come to stream in platinum sector mining and not the auxiliary sector that support this.
4. Much discussion is being made about controlling the metals sold and produced. Whilst doing this unilaterally could be negative for global trade agreements and illegal at some cases, a coordinated format with other world producers could be the best way of dealing with the matter going forward.
4.1 Consider an OPEC like organisation for platinum and PGM producing countries as it is finite and rare. The investment sector needs to be protecting, including proper production planning and research.
5. There is no formal coordination between the industry and government SOE dealing in minerals development and research.
5.1 Establish a platinum marketing council to promote platinum’s long term business fundamentals and scientific research.
6. Empower the Minister with funding of junior explorers who will not have access to funding under current market conditions. The Minister of Finance should make significant appropriation of funding to shore up the Junior Explorers with great urgency. All exploration has about stalled and the industry held back for another 10 year delay since the 2008 financial crisis. A mine takes 10 years to develop from exploration to mining, the rights period does not take this into full account and the bad market conditions calls upon government to respond as a friend not a foe to this flangling sector.
EXPLORATION IS CRITICAL RESEARCH & DEVELOPMENT and as such should be able to attract the similar grants available to R&D projects. In many cases what we observe and report are sciences and we even develop own technics and technologies on the job to do our work even better. All the data we extract ends up belonging to the State via the Council for Geosciences.
This sector of the brave is dying if not already dead. South Africa anticipated 5 listings on the JSE this year and none have occurred or likely to occur if the status quo remains unmitigated by your good office on an urgent basis.
Whilst other countries have various means to attract domestic investment in explorers South Africa has almost none and this leaves the sector highly vulnerable to lack of success and foreign buyouts.
The sector has to be talked up not down, references to increased taxation on the sector; mining sector already bears the brunt of several taxes, including royalties. There is no need to curtail explorers trading by imposing higher taxes, at times these trades are done at no cash benefit but buying of exploration debt in return for equity participation.
Exploration dollars are still shying away from South Africa in a greater extent.
Global Nonferrous Exploration Budgets by Region, 2011
What is critical in thought and planning is the fact that platinum is finite and close to 80% of it is here in South Africa. It is a critical resource for South Africa. The RSA currently produces about 80% of the world’s platinum, which should mean it is the most obvious industry in which the country can claim a natural competitive advantage, not only in mining but in a host of downstream applications.
Honourable Minister, your urgent attention to these very serious matters is requested. Perhaps establish a committee to look at these matters closer and report back to you for budget consideration purposes.
Sincerely
Mr Bongani
Mbindwane
CEO
Platfields Limited
info@platfields.co.za
twitter
@mbindwane
Well said. Platinum is white gold and the source - Bushveld Complex is entirely in South Africa......measures should be put in place to encourage sustainable growth from revenues derived from the PGMs. I hope the Ministry will respond positively.
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