Is SA’s mining industry too deep in the COVID-19 crisis? Description video: The Covid-19 pandemic has far-reaching economic ramifications on the productivity and profits of many industries without the exception of the mining industry. For more than a century mining […]
Is SA’s mining industry too deep in the COVID-19 crisis?
The Covid-19 pandemic has far-reaching economic ramifications on the productivity and profits of many industries without the exception of the mining industry. For more than a century mining was a flourishing industry in South Africa. In 2019 it contributed close to R361 billion or 8.1 per cent to SA’s GDP and over R91 billion to fixed investment. It employed 454,861 people and paid R24.3 billion in taxes. Since early March, the mining industry’s average share price has dropped 10 per cent and individual companies have lost 30 to 50 per cent of their market value. Is mining too deep in the Covid-19 crisis? How can the mining industry pave the way to total recovery and become the sunrise industry it wants to be?
The mining industry prepares for the crisis
Large mining companies are better prepared for the current crisis than in previous downturns. However, small market participants can experience significant problems as their capital gradually dries up.
International Monetary Fund predicted pandemic could trigger biggest recession since the Great Depression of the 1930s.
The entire mining industry is facing difficult times. An exception may be large companies that already have agreements on development projects, plans to increase investments and search for new deposits..
«By and large, mining companies are now much more resilient than they used to be. Huge amounts of debt have been written off and a significant amount of cash returned to shareholders. History shows that in times like these, having a strong partner in your registry or at the project level through a joint venture is key.», – said Justin Mannolini, partner of Gilbert and Tobin in Perth.
«If you are on your own, you have serious problems as the market will potentially be closed to most newbies for a very long time.», – he added, assessing that the stagnation could stretch until 2022.
Gold miners are well equipped to weather the crisis given the attractiveness of the precious metal as a safe haven for investment.
But the electricity and part of the mining industry may face big problems in finding funding, said James Eginton, Senior Investment Analyst at Tribeca Global Natural Resources Fund in Sydney.
Nevada Copper Corp opened the first U.S. copper mine in 40 years last December, then froze production in April due to coronavirus.
Young and small companies can be saved by having a worthy project in the center of attention of larger players.
Since business development teams and geologists are forced to work remotely, all their forces are now being thrown into the search for new projects and investors..