BUSINESS MAVERICK: The sun is rising on SA mining shares while setting on the industry

The prices of JSE-listed mining shares have surged in 2019, leaving most other sectors in the dust. In the year to date, the bourse’s mining index has risen by about 25%, compared to about 10% for the all-share index. The gold index has added a hefty 50%. Shares in Impala Platinum, which sank for years, have more than doubled their value in the year to date after nose-diving for years.

There are a number of factors behind this rebound. Platinum companies, notably Amplats, have made profitable transitions to mechanisation and undergone restructuring. Labour is the sector’s biggest cost and there are fewer miners working underground because unprofitable operations have been shafted. The number of workers in the platinum mining sector has declined from around 200,000 in 2008 to under 170,000 last year, according to the Minerals Council.

Not really, according to industry watchers. Lara Smith, managing director at mining consultancy Core Consultants, toldPrecious metals in general are coming up and feeding into stock prices. But South Africa still has all the legacy issues and bad policies. In fact, I have eight producing South African mines given to me as a list for sale. Investors just want out. And earlier this year I was given a list of 20 mines, mostly in South Africa.

So portfolio investors are piling into South African mining equities, but operational capital, which is directed to long-term stuff such as exploration and the building of new mines or the expansion of existing ones – and in mining, the time-scales are generally in the decades – is not being sunk into new projects. And JSE-listed companies that are investing in expansion generally are not doing so in South Africa, or at least not much.

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