Gold mining silicosis lawsuit consolidation sought

Lawyers for three separate class actions against gold mining companies have applied to the High Court in Johannesburg to have the cases consolidated.
The lawyers represent more than 25 000 miners who contracted silicosis on South Africa's gold mines.

"The number of class members who stand to benefit, if the litigation is successful, is conservatively estimated at between 100 000 and 200 000," the lawyers said in a joint statement on Thursday.

Abrahams Kiewitz Attorneys, the Legal Resources Centre and Richard Spoor Attorneys Inc are representing the miners.

"The litigation names 32 respondent gold mining companies that owned or operated 82 different gold mines from 1956 to the present.

"The respondents include Harmony Gold Mining Company Limited, Avgold Limited, AngloGold Ashanti Limited, Gold Fields Limited, Village Main Reef Limited, Simmer and Jack Mines Limited, DRDGold Limited, ERPM Limited, Anglo American SA Limited, African Rainbow Minerals, Randgold and Exploration Company Limited and their subsidiaries."

The proposed class action sought to distinguish between two classes. The first was current and former mineworkers who had contracted silicosis and the dependants of mineworkers who died of silicosis.

The second was current and former mineworkers who had contracted pulmonary tuberculosis, and the dependants of mineworkers who died of pulmonary TB, excluding silicotuberculosis.

The miners' legal representatives believed consolidating the suit would allow for justice to be served more efficiently and effectively.

"The purpose of the litigation is to hold the industry accountable for the harm that it has done and to put to an end to the type of conduct that has enabled it to profit at the expense of its workers," they said.

The case, referred to as Bongani Nkala and Others v Harmony Gold Mining Company Limited and Others, was pending in the High Court in Johannesburg.

South Africa all but off BHP Billiton’s radar screen

 South Africa has all but fallen off the radar screen of BHP Billiton, the world’s biggest mining company, which on Tuesday reported an 8.7% fall in revenue to $65.9-billion for the year ended June.

The name of the country did not cross the lips of new CEO Andrew Mackenzie and one got the impression that this region’s aluminium, thermal coal and manganese interests are hanging on by a thin thread in a company dominated by iron-ore, oil, copper and coking coal.

When BHP and Gencor/Billiton of South Africa merged at the start of the new millennium, the South African assets helped to lift the chin of a then downcast BHP.

The performance of then standalone BHP, which in merged form has paid out more in dividends than the rest of the mining world put together, was so mediocre that the Economist of London scoffed that the letters BHP really stood for Broken Hearted People, and not Broken Hill Proprietary.

But the powers that be are clearly in no mood to return the favour; instead they are directing any tender, loving care they still have towards potash risk at Jansen in Canada, which is still a cost centre.

South Africa, a long-standing profit centre, has gone ex growth and no longer features at all on the company’s pipeline of 21 projects.

Such short shrift by the world’s biggest mining company, and indeed others too, does not augur well for South Africa, given that the country has come to rely on the multiplier benefit that the mining sector provides to the rest of the economy.

Mining has the potential to grow South Africa’s gross domestic product (GDP) significantly, which is its main potential contribution to the country.

But it needs investment flow and currently investors are deserting it, and the huge advantage of capital inflow is being lost to South Africa.

In the mining sector as a whole, hundreds of millions of dollars of planned capital investments in projects are being delayed or cancelled.

The industry is going ex growth, which is the ugly anti-developmental story of 2013.

How can South Africa reverse this devastatingly dangerous trend?

The main objective of governments the world over is, or should be, to improve the incomes of every single one of their citizens.

But in order for South Africa to achieve that goal, it needs investor confidence, political certainty and the capacity to deliver, without which there can be no economic growth and thus no economic transformation, as has been proved globally.

Because the mining economy can grow the overall South African economy, it is essential that South Africa places positive emphasis on its mining economy.

Gold Fields CEO Nick Holland, who addressed the Gordon Institute of Business Science (Gibs) last week, has analysed 40 mining-driven global economies and his analysis shows that in each case, more than a quarter of total export revenue is derived from the sale into the world of mined products.

The economies of countries like South Africa are crippled without mining exports.

Mining’s direct weighted average contribution in the Brics, or Brazil, Russia, India, China and South Africa, bloc countries and seven selected resource-rich countries found that a 3% GDP growth translates into $340-billion worth of benefit for the country concerned.

With the 2.6-times multiplier effect that mining provides, the contribution rises to 7% of GDP, or $850-billion.

“That’s the win-win pie,” says Holland, who points out that such a win-win has been achieved in Chile, which has a consistent mining regime that supports incoming foreign investment and where BHP Billiton is continuing to invest.

Mining’s direct benefit to Chilean GDP in 2010 was 14%, not because of its State-owned copper company Codelco but the result of new private-sector investment from mining giants.

MINING MAGNIFICENT MULTIPLIER

The multiplier effect of mining creates significant value in an economy, the GDP contribution of mining first manifesting itself through direct mine supply and then through indirect supply to the mine suppliers.

This puts more money into the pockets of the people at home, who can, in turn, invest and spend it in the general economy.

Adding all that up proves that every 1% GDP growth in mining is worth 2.6% for the overall economy.

But there is another multiplier, too, in that mining is also a proxy for capital inflows, skills, other industries, technology transfer, infrastructure development and community upliftment.

EVERY MINING JOB HELPS 27 PEOPLE

In South Africa mining employs 500 000 people directly and 900 000 indirectly, totalling 1.4-million jobs.

In turn, on average, every direct and indirect worker has nine dependants.

The secondary and tertiary sectors then extend the number of dependants to 14 and the informal sector adds another two, which takes the total number of dependents to a very substantial 27.

Mining’s outreach to 27 people gives it the potential to dig deep into poverty alleviation.

RESOURCE NATIONALISM IS NOT NATIONALISATION

Holland, in his talk at Gibs, defined resource nationalism – as distinct from the very different nationalisation concept – as the effort of countries to extract the maximum value and developmental impact for their people from their finite natural resources.

“In our view, there’s nothing wrong with resource nationalism. In fact, it is very rational for governments to have this as a key objective. Surely governments are correct to want to extract as much as they can, for the benefit of their country and people, out of what are finite resources.

“In fact, we would even go further and say that, not only is it legitimate, but it’s actually the duty of government to see that a country’s natural resources benefit its people,” added Holland.

The central government debt of 40 countries analysed has rocketed to 75% of GDP over the last year, from 20% in 2003, making it understandable for governments to want a bigger piece of the mining pie.

The South African government has got to work out how it can help to save mining operations from closing.

“They’ve got to consider fiscal relief. We can ill afford carbon taxes. Royalties were put in and they are also an extra burden for the industry,” Holland said at Gibs.

“If we don’t get people to the table to start debating, we are going to accelerate the industry’s decline. We need to find some common ground on wages. The road to disaster is continuing to pay above-inflation wage increases when productivity keeps declining. Mining companies have no option but to cut costs.

“Retrenchments are taking place across all levels and a lot of senior mining people are already on the streets,” Holland added.

Also, as big as it is, BHP Billiton has been pushed around and insulted by Canada's potash cartel and it should at least acknowledge that it has had a far better deal out of South Africa than it is having out of Saskatchewan.

IFM hikes Sky Chrome, Lesedi resources 64%

An updated resource and reserve has indicated positive increases in tonnages and grades for ferrochrome producer International Ferro Metals’ (IFM’s) Sky Chrome and Lesedi mines in the Bushveld Complex, in the North West province, the company stated on Wednesday.

The total resource had increased by 64% from 125-million tons to 206-million tons, with the average chrome oxide (Cr2O3) grade having increased from 34.49% to 37.57%.

In addition, the total reserve had increased by about 6% to 92-million tons, with the average Cr2O3 grade having reduced marginally from 28.11% to 27.85%.

The improvements in resource grade and tonnages largely reflected the remodelling of the resources at the Sky Chrome and Lesedi mines, as well as the conversion and addition of the inferred resources at Sky Chrome mine.

“The increase in tonnages and grades in our latest resource and reserve statement demonstrates the quality of IFM’s assets, and underlines the long-term value inherent in the company.  Combined with our successful cost cutting and improved operational stability, we are continuing to position IFM well for the future,” CEO Chris Jordaan said.

Meanwhile, IFM had also been awarded the rights to the platinum-group metals (PGMs) in the middle-group chrome seams of the Sky Chrome mine.

“The resource statement for the PGMs has been completed and resulted in an estimated inferred resource of 1.34 g/t of PGMs in the 181-million tons of total chrome ore resource at Sky Chrome,” IFM stated.

The company also confirmed that its R500-million loan facility with the Bank of China was expected to be renewed for a further year in September.

The facility, which had been in place since June 2009, had been provisionally extended to September 25 to allow sufficient time for the Bank of China head office approval process to be completed. A further announcement would be made when the renewal became effective, IFM said.

Lack of peace at SA platinum mines drives up default risk

More than a year after South Africa’s worst mining violence since the end of apartheid, platinum mines are still striving to restore peace, a factor driving up the nation’s default risk faster than for emerging-market peers.

Contracts insuring South Africa debt against non-payment for five years have increased 109 basis points to 244 since Aug. 16, 2012, when 34 people died as police opened fire on protesting mineworkers at Lonmin Plc’s Marikana mine. That’s a bigger jump than for any investment-grade country, according to data compiled by Bloomberg. Contracts for Mexico, which has a similar credit rating, climbed 13 basis points, or 0.13 percentage point, to 125 in the same period.

Labor unrest that began last year at Marikana spread across Africa’s largest economy, prompting Fitch Ratings, Standard & Poor’s and Moody’s Investors Service to downgrade South Africa for the first time since white minority rule ended in 1994. Wage disputes continue at platinum and gold mines, while a strike by 30,000 workers shut production at carmakers including General Motors Co., Toyota Motor Corp. and Bayerische Motoren Werke AG.

“Investors are waiting to see how South Africa resolves the labor issues,” Victor Mphaphuli, a portfolio manager at Stanlib Asset Management, which oversees the equivalent of $50 billion, said by phone from Johannesburg yesterday. “It’s something that still sits there, that’s hanging over our market.”

External Shocks

Current account and fiscal deficits, slower economic growth and the lowest interest rates in more than 30 years leave South Africa vulnerable to external shocks, Mphaphuli said. The nation needs average inflows of 16 billion rand ($1.6 billion) a month to finance the shortfall on its current account, according to Standard Bank Group Ltd., Africa’s largest bank.

Foreign investors have sold a net 4.29 billion rand of bonds since May 22, when Federal Reserve Chairman Ben S. Bernanke said the U.S. may reduce monetary stimulus that has helped boost demand for emerging-market assets. Inflows have dropped to 26.8 billion rand this year, compared with 66.3 billion rand a year earlier, according to JSE Ltd., which runs the nation’s stock and bond exchanges.

The economy expanded an annualized 0.9 percent in the first quarter, the slowest pace since a 2009 recession. That’s making it harder for Finance Minister Pravin Gordhan to rein in the fiscal deficit, a concern raised by Moody’s, S&P and Fitch when downgrading South Africa, starting in September.

Budget Gap

The budget gap for the fiscal year that ended in March is estimated at 5.1 percent, according to the National Treasury. The nation posted a current account shortfall of 5.8 percent of gross domestic product in the first quarter, compared with 3.2 percent in Brazil and 1 percent in Mexico.

Auto workers are asking for a 14 percent wage increase, while the National Union of Mineworkers has asked for 60 percent increases for entry-level jobs. The inflation rate probably rose to 6.2 percent in July, above the central bank’s 3 percent to 6 percent range for the first time since April 2012, a report may show tomorrow, according to the median estimate of 20 economists in a Bloomberg survey.

“It remains difficult to see an easy way out without more strike action, output loss, low levels of inward investment and violence,” Peter Attard Montalto, a London-based emerging- markets economist at Nomura International Plc, said in an e-mail on Aug. 15. “It’s hard to say the lessons of a year ago have been learnt.”

Output Contracts

Mining output, which accounts for more than 50 percent of exports, unexpectedly shrank 6.2 percent in June, while manufacturing production slowed to 0.4 percent from 2.2 percent a month earlier, the statistics agency said Aug. 8. Strikes have already shaved 0.3 percent off growth this year, President Jacob Zuma said June 13.

“The backdrop looks poor for emerging markets, but it boils down to the other factors that are specific to South Africa, like the current-account deficit, the budget deficit,” Stanlib’s Mphaphuli said. “South Africa’s twin deficits seem to stand out in comparison with its peers. That would have an impact on the currency and push up the cost of insuring the debt.”

The rand slumped 0.8 percent to 10.1719 per dollar as of 5:14 p.m. yesterday in Johannesburg, bringing its decline this year to 17 percent, the worst of 24 emerging-market currencies monitored by Bloomberg. Yields on benchmark 10.5 percent bonds due December 2026 climbed 20 basis points yesterday to 8.60 percent, the highest since January last year.

‘Global Fears’

Inflows into South Africa’s bond market could resume as yields rise and the Fed provides more clarity on monetary stimulus, according to John Cairns, a strategist at FirstRand Ltd.’s Rand Merchant Bank in Johannesburg.

“For South Africa, the rand and all emerging markets the key issue is whether stronger core economies and higher core yields will slow or reverse capital inflows,” Cairns wrote in an Aug. 19 note. “The short-term answer is yes, hence the current bout of weakness. On a multi-month basis the issue is less clear: South Africa has seen inflows resume aggressively each time the global fears die down.”

South African yields may have to rise further to attract foreign investment, Mphaphuli at Stanlib said. South African 10- year bonds offer a real yield of about 1.6 percentage points, based on the 10-year break-even rate, a measure of investor expectations for inflation over the period. That compares with U.S. Treasury yields close to 3 percent.

‘Lost Ground’

The extra yield investors demand to hold South Africa’s dollar debt rather than U.S. Treasuries has climbed 29 basis points in the past month to 269, according to JPMorgan Chase & Co. indexes.

“The whole world wants dollars, and nobody wants South African assets,” Ion de Vleeschauwer, head of dealing at Bidvest Bank Ltd., South Africa’s biggest chain of money changers, said by phone from Johannesburg yesterday. “If we had a stable labor environment you wouldn’t have lost so much ground.”

SA Mining at 'breaking point' as investors flee

Johannesburg, South Africa --- 19 August 2013 - The South African mining industry is at “breaking point” as calls from both government and workers for a greater cut of the profits are hastening an investor exodus from the country.

Making this statement in a speech here, Gold Fields CEO Nick Holland said: “Governments in particular are seeing mining as a means of putting more into their central coffers. A lot of it has come about because of the metal boom that we’ve seen. The equity model is at breaking point,” he added.

Bloomberg News reports that Australia, Namibia and Zimbabwe are among nations that have sought to expand their share of profits from natural resources in the past three years by raising mining taxes or favouring state control of projects. In South Africa, where Gold Fields is based, labour unions, companies and the government are vying for a larger share of revenues even as commodity prices slide.

“The infighting will encourage investors to flee, causing the industry to shrink and hurting all parties,” Holland said. “Protecting investor rights will help countries make the most of their resources,” he added.

The HSBC Global Mining Index has lost 29% since the start of 2010, while the Dow Jones Industrial Average  is up 47% and the FTSE 100 Index  22%. While the financial crisis in Europe and a sell-off in gold are partly to blame, resource nationalism has also spurred investors to sell mining stocks, according to Holland.

 “Equity investors are frustrated,” he said. “We’ve spent a lot of their money and given them very little back for it. They keep reminding us of that.”

The world’s biggest mining companies are cutting costs, selling assets and scrapping expansion plans to counter lower prices. Investors have pressured new CEOs at BHP Billiton Limited,  Rio Tinto Group and Anglo American plc to boost returns to shareholders and defer new mines amid waning commodity demand.

“There are many hundreds of billions of dollars not being spent,” Holland said. “We haven’t yet seen the impact that that’s going to have on economies going forward. You’re going to see it in years to come.”

Anglo is among companies operating in Zimbabwe, where President Robert Mugabe this month reiterated his determination to take a 51% stake in foreign-owned projects for the state or for black Zimbabweans.

Elsewhere in Africa, Tanzania and Namibia have studied imposing a “super-profit tax” on mines, while in South Africa, former African National Congress youth leader Julius Malema in July formed a political party that favours nationalising mines. In Australia, the government last year passed laws to place a 30% tax rate on iron-ore and coal-mining profits.

While it is governments’ duty to maximise the benefits of their natural resources for their people, investors must also be allowed to make returns, according to Holland.

“We need investors,” he said. “There’s a lot of capital needed to build these operations. The lead times are long and the risks are high. They need a reasonable rate of return,” he added. 

“One mining job supports 27 other people, either dependents or other workers,” he claimed.

Companies must work with governments, workers, investors and communities to expand the industry, rather than fighting over profits, Holland said, citing Peru, Chile, Botswana and Zambia as nations where cooperation has been successful.

The industry can either take the high road and start collaborating and forming partnerships which will increase investments, or we can keep on fighting each other for a higher share of a diminishing pie,” he warned.

Underground coal gasification holds promise as energy source – Sipho Nkosi

Underground coal gasification (UCG) holds promise as a future source of energy for South Africa, Exxaro CEO Sipho Nkosi said on Monday.

Nkosi, who hosted a media lunch, told Mining Weekly Online that many companies were investing in UCG, a process of converting coal into gas while it is still underground, or in situ. In some countries, like Canada, UCG is referred to as in situ coal gasification.

In both cases, the process makes use of deep, inaccessible coal that would otherwise remain unused in the ground and is seen as a way of reducing fatalities in coal mining and minimising environmental impact.

The potential is to use the synthetic gas (syngas) that the UCG process provides for the generation of electricity or the production of gas-to-liquids (GTL), chemicals and fertilisers.

There have been many UCG trials in the last few years in the US, Australia, South Africa, Canada and Europe, with a consequent step-change in UCG development towards commercialisation.

Exxaro, which has a UCG project, has teamed up with UCG technology provider Linc Energy of Australia, which already owns and operates a commercial UCG operation in Uzbekistan, which supplies syngas to the nearby Angren power station.

“It’s still work in progress,” Nkosi told Mining Weekly Online.

Eskom has been researching and developing UCG at Majuba for the last six years; Anglo American Thermal Coal has a project and former Sasol executives Johan Brand and Eliphus Monkoe are intent on going ahead with a UCG project in Theunissen, in the Free State.

UCG potential is also said to exist in Botswana, Mozambique and even Namibia.

Exxaro announced earlier this year that it had agreed to pay Linc Energy a A$20-million licence fee in return for the right to deploy the ASX-listed company’s UCG technologies across sub-Saharan Africa.

Formal agreements, subject to several conditions, also gave Linc the option to secure equity positions of up to 49% in all of Exxaro’s UCG projects.

Linc Energy will hold a minimum of 15% in the first project, which could combine power generation and GTL production.

The Linc tie-up opens the way for the start of detailed project work to monetise the perceived inherent value in this clean-coal technology.

The electricity-generating potential of the first plant would not be smaller than 200 MW. Any GTL facility would have a capacity of greater than 10 000 bbl/d.

The bankable feasibility study will be completed by mid-2015, with commissioning of the first gasifier scheduled for mid-2016, subject to regulatory and commercial viability.

Advances in horizontal and directional drilling allow coal seams to be accessed more efficiently, improved monitoring provides more accurate site measurement and better coal ignition technologies are enhancing UCG’s potential.

Detailed UCG legislation is being formulated in Canada’s Alberta province to accommodate the privately owned Swan Hills Synfuels demonstration project there.

It has also commissioned the world’s only combined GTL and UCG demonstration facility, in Queensland, Australia.

The agreement follows on from initial joint concept studies conducted over the past 18 months and will seek to blend Exxaro’s aspiration to pursue coal beneficiation with Linc Energy’s UCG know-how.

Exxaro, which is South Africa’s second-largest coal producer, with current production of 40-million tons a year, also has business interests in Botswana and the Republic of Congo.

Rod Walton: Finding good news about coal is tough dig these days

Rumors of the death of coal may be greatly exaggerated. 

Taking Mark Twain's famous quote about his own demise way out of context, it does seem that many outside observers could look at current events and determine that the U.S. and other nations are moving beyond the need for coal-fired power. 

They'd be short-sighted, but I can understand why they see it that way. 

Finding good news about coal is tough these days. The Wall Street Journal reported last week about Rio Tinto PLC's struggle to expand one of its mines in Australia, a nation that accounts for one-third of global coal exports. 

Earlier this month, Moody's Investors Service changed its outlook for the U.S. coal industry from stable to negative, despite predictions that the commodity will increase its share of domestic power generation from 37 percent to 40 percent this year. 

And then there's AEP-PSO and Oklahoma Gas & Electric. American Electric Power-Public Service Co. of Oklahoma has opted not to fight the U.S. Environmental Agency on regional haze and other air pollution fronts, so the Tulsa-based utility will close one Oologah coal-fired generation unit by 2016 and the other 10 years later. 

OG&E stuck by its proverbial guns, taking part in a federal lawsuit against the EPA's regional haze reduction timeline and, at first, gaining a stay in Denver federal court. The court, however, since has ruled against OG&E, which likely will appeal, while feds and the Sierra Club have filed their own legal actions. 

Coal foes are optimistic that 99,000 megawatts of power generation may be retired in the next few years, according a 2012 release by the Union of Concerned Scientists. These combined closures, if realized, would represent nearly one-third of U.S. coal generation output. 

So is it time to sing that dirge for dirty old coal, as its foes surely are crowing? Hardly, according to a more detailed look at where the industry is and where it's going. 

Coal has been around for centuries and likely will be part of U.S. power generation for decades and maybe centuries to come. Numbers to consider: 500 billion tons in reserves beneath the soil, and 29 states which generate more than half of their electricity from coal pay about 8.8 cents per kilowatt-hour, 11 percent less than the national average, according to federal statistics. 

Oklahoma's own coal industry is fairly quiet, but one Tulsa company has continued to do quite well, despite regulatory challenges and occasional bad publicity. Alliance Resource Partners, which operates mines in Illinois, Indiana, Kentucky, Maryland and West Virginia, has reported 12 straight years of record earnings and all-time highs in coal sales and volumes in 2012.