South Africa - Mining

Since the late 19th century, South Africa's economy has been based on the production and export of minerals, which, in turn, have contributed significantly to the country's industrial development. One of the largest and most diverse mineral producers, South Africa was the largest producer and exporter of chromium and vanadium; the leading producer of gold, gem diamonds, ferrochromium, platinum (88% of world reserve base of platinum-group metals), manganese (80% of world reserve base of ore), and synthetic liquid fuels and petrochemicals derived from coal; the second-largest producer of antimony (8% of world output) and titanium (third-largest exporter); the third-largest exporter of coal; and a major producer of cobalt, copper, iron ore, lead, nickel, silver, uranium, zinc, zirconium, aggregate and sand, andalusite (aluminum silicate), asbestos, dimension stone, fluorspar, lime, limestone, phosphate rock, sulfur, and vermiculite. South Africa was self-sufficient in the vast majority of its mineral needs, the bulk of which were produced in the northern half of the country. South Africa was among the top five countries in terms of reserves, ranking first in reserves of andalusite, chromite, gold, manganese, PGMs, and vanadium. De Beers, the South African mining giant, accounted for 94% of the country's diamond production and controlled 80% of the world's uncut diamond trade.

In 2000, mineral commodities accounted for 47% of the $30.8 billion in total exports—gold, diamonds, platinum, and other metals and minerals were the top export commodities in 2002. The total value of sales of primary minerals was $14.2 billion in 2000 ($12.3 billion in 1999); $11 billion worth was exported ($9.5 billion in 1999). Processed mineral materials added another $2.98 billion to sales in 1999 and $2.43 billion to exports. The leading export earners in 2000 were PGMs ($3.9 billion), gold ($3.4 billion), coal, ferroalloys, aluminum, iron ore, vanadium, and copper. The year 2000 was the first in which the value of PGM exports exceeded that of gold. The recent sharp increase in PGMs has helped compensate for the declining role of gold. No export figures were available for significant export earners diamond, steel, titanium, and zirconium. The weakness of the rand allowed the mineral sector to remain competitive. The mineral industry contributed 25%–31% of GDP, of which 6.5% came from primary mined products—mining was the country's leading industry—and an additional 20%–25% came from value-added processed mineral products such as aluminum, ferroalloys, steel, and titanium, a development of the 1990s. The production of iron, steel, chemicals, and fertilizers ranked among the country's top industries.

In 1999, South Africa produced 62 mineral commodities from 695 mines and quarries, including 530 industrial (half devoted to aggregate and sand production), 61 coal, 54 diamond, and 53 gold operations. In 1999, the mining and minerals processing through semimanufactured products accounted for more than 500,000 jobs, of which 437,000 were in the primary mining sector (466,700 in 1998, and 778,000 in 1990).

The 2000 output of PGMs (platinum, palladium, rhodium, ruthenium, and iridium) was 206,770 tons (188,636 in 1996)— 198,944 kg was exported (114,459 kg of platinum, 55,818 kg of palladium, 19,427 kg of ruthenium, and 12,067 kg of rhodium). Production came almost exclusively from mines in the Bushveld Complex, north of Pretoria, and included rhodium and other PGMs (88%), platinum (74%), and palladium (32%). The PGM industry employed more than 96,000 workers. The shortfalls in Russian PGM production since 1997, and South Africa's higher-grade ores (0.48:1 palladium-to-platinum ratio vs. 3:1 at Siberia's Norilsk nickel complex) have created an incentive to expand production. More than $3.5 billion in investment spending was projected, to bring capacity to 246,300 kg by 2007. The Anglo American Platinum Corp. Ltd. (Anglo Platinum), the world's largest PGM producer, supplied 37% of the world's platinum, from six mines and three processing plants, all in South Africa. Anglo Platinum's proved mineral reserves totaled 145.56 million tons; probable reserves, 1,349 million tons; and indicated resources, 1,624 million tons. In 2000, Anglo Platinum spent $193 million on expansions and two new mines, and $450 million was to be spent in 2001. Impala Platinum Holdings Ltd. (Implats), South Africa's second-largest producer, operated 13 shafts within the Merensky and UG2 Reefs, and planned on investing $486 million by 2004 to maintain its capacity at 31,110 kg per year until 2030—from 112 million tons of ore reserves. Lonmin PLC, the third-largest PGM producer in the world, divested its nonmining interests in 2000, restructured itself as a focused PGM producer, and announced plans to increase production by 43% within a 7-year period, to 27,060 kg per year of platinum, at a cost of $550 million. The country's total reserve base of PGMs (metal content) was 62.8 million tons.

Primary gold output in 2000 was 430,778 kg, down from 491,680 in 1997 and the 1970 peak of 989 tons. Anglogold Ltd. (the gold division of Anglo American) accounted for 37% of output; Gold Fields Ltd., 25.7%; and Harmony Gold Mining Co., 15.3%—the three companies had capacities of 161 tons per year, 125 tons per year, and 87.1 tons per year, respectively. Anglogold reported its South Africa reserves to be 364.1 million tons (5.41 grams per ton of gold), and measured and indicated resources, 1,558.9 million tons (4.0 grams per ton of gold). The main shaft at Anglogold's high-grade Moab Khotsang deposit was completed; contained reserves totaled 18.5 million tons (16.36 grams per ton of gold), and resources, 14.3 million tons(26.52 grams per ton of gold), for a combined gold content of 681,000 kg. Gold Fields operated three gold-mining divisions— the Dreifontein, the Kloof, and the Free State, which included the new underground Target development—and estimated total measured and indicated mineral resources to be 304.3 million tons (8.8–17.3 grams per ton of gold) and proved and probable ore reserves, 244 million tons (5.0–12.9 grams per ton of gold). Through aggressive acquisitions, Harmony Gold, which was spun off from Randgold Resources Ltd. in 1997, has developed into a major gold-mining company, increasing its production from 18,040 kg per year in 1996 to 77,759, and its gold reserve base from 249 to 1,026 tons. Harmony's total contained measured, indicated, and inferred mineral resources were 1,863.4 million tons (1.54–6.29 grams per ton of gold), of which proved and probable ore reserves totaled 170.7 million tons (1.91–7.10 grams per ton of gold). Placer Dome reported proven and probable ore reserves at South Deep to be 107.8 million tons (8.4 grams per ton), and additional measured and indicated mineral resources of nearly 70 million tons (9.0 grams per ton), with a projected mine life of 72 years. The country's total gold reserve base (metal content) was 35,900 tons.

Gold, discovered in 1886, occurred along a 430-km arc that stretched across Gauteng, the North-West, Mpumalanga, and the Free State. Production of gold rose steadily through the 1960s and 1970s, as newer mines opened to keep pace with burgeoning world-market demands. Gold production declined in the 1990s, because of reduced ore grades, increased mining costs, labor unrest, and industry restructuring. In 1996, production reached its lowest level (496,846 kg) since 1956, although South Africa was still the world's largest producer. The world's deepest mine (3,777 m) was the Western Deep Levels gold mine, at Carletonville (Gauteng). The high cost of deep gold mining, and the decline in world market prices have caused South Africa's gold export earnings to decline by $300–$900 million per year since 1994—dropping from $7 billion in 1994, to $3.4 billion in 2000. Gold ore grades steadily declined, from 13.3 grams per ton in 1970, to 4.5 grams per ton in 2000. Employment in the gold mines, meanwhile, declined to 197,500, from 416,800, and South Africa's world share of new mined gold dropped from 68% in 1970, to 17% in 1998.

Iron ore and concentrate output in 2000 was 20.9 million tons (metal content). Of the iron ore sold in 2000 ($438 million), 68% was exported. Iscor Ltd.'s two mines, Sishen and Thabazimbi, accounted for more than 80% of South Africa's output. The Sishen Mine, Northern Cape Province, produced 23 million tons per year of contained iron ore at a grade of 65% iron; 80% was exported, via Saldanha Bay. Sishen has commissioned an expansion program, to increase production capacity to 30 million tons per year iron ore by 2003 and 38 million tons per year by 2007. Because Thabazimbi had a remaining mine life of 6–8 years, Iscor was conducting a prefeasibility study at the Welgevonden deposit, which contained a high-quality resource of 259 million tons of iron ore suitable for open-pit mining. In the face of heavy indebtedness, Iscor, which was also South Africa's largest crude steel producer, was to unbundle its assets and spin off its coal, base metals, iron ore, and titanium heavy-minerals assets into a separate mining company. The country's total iron ore reserve base (metal content) was 1.5 million tons.

Chromite output in 2000 (gross weight) was 6.62 million tons, compared with 6.82 million tons in 1999 and 5.08 million tons in 1996. Chromite ore, from more than 20 mines in the Bushveld Ultramafic Complex, fed South Africa's world-leading ferrochrome industry and its major chromium chemicals and refractories industry. The leading chromite producer was BHP Billiton's Samancor Group, the world's largest integrated ferroalloys producer. In FY 2000/01, Samancor produced 3.16 million tons of chromite ore and 908,000 tons of chrome alloys. Samancor's total chromite resources exceeded 1.8 billion tons, and were expected to support mining activity for more than 200 years. Xstrata AG, of Switzerland, which produced 1.14 million tons of ferrochrome, reported proven chromite reserves of 4.4 million tons, probable reserves of 21.8 million tons, and inferred resources of 332.9 million tons. The new Dwarsrivier open-pit chrome mine was to start production at its underground section in 2001, and produce 1 million tons per year of run-of-mine ore. Total chromite ore reserved exceeded 450 million tons, with a chromium ore reserve base (metal content) of 3.1 million tons.

Mine copper (metal content) output in 2000 was 137,092 tons, down from 164,000 in 1998. Palabora Mining Co. Ltd. had a 205,000-ton-per-year capacity. The Nigramoep copper mine's operations were to begin closing in 2002; the mine had remaining proved mineral reserves of 4.9 million tons and mineral resources exclusive of reserves of 7 million tons. The country's total copper reserve base (metal content) was 13 million tons.

The output of antimony, at the Consolidated Murchison mine (near Gravelotte, Northern Province), was 4,104 tons (metal content), down from 5,278 in 1999. Proved and probable reserves of antimony amounted to 1.5 million tons, and mineral resources exclusive of reserves totaled 8.6 million tons. The country's total antimony reserve base was 250,000 tons.

Output of manganese ore and concentrate (primarily metallurgical-grade, but also chemical) was 3.64 million tons (gross weight) in 2000, and 3.24 million tons in 1996. In FY 2000/01, Billiton's Samancor Manganese Division produced 2.16 million tons of ore from its Mamatwan open-pit and Wessels underground mines (both near Hotazel); 40% was exported to ferroalloy producers, and Samancor had a 3.7 million ton per year capacity. Associated Manganese Mines was adding a new shaft complex at the Nchwaning III Mine, which was to be operational by 2003, to have a run-of-mine capacity of two million tons per year of manganese, and to extend its mine life by 20 years; total proved reserves were 12.8 million tons (44.61% manganese, 7.30% iron), and measured, indicated, and inferred resources were 237 million tons (41.24% manganese, 7.98% iron). The country's total manganese reserve base was four billion tons.

Production outputs for the other principal metals were: vanadium, 18,021 tons (with a reserve base of 12 million tons); titanium (ilmenite and rutile concentrates), 2.1 million tons (2.43 million tons in 1998; with a reserve base of 146 million tons); zirconium concentrate (baddeleyite and zircon), 253,000 tons (a reserve base of 14.3 million tons); and nickel (metal content), 36,616 tons (a reserve base of 11.8 million tons). South Africa also produced cobalt, lead, silver, uranium, and zinc. Anglo American was expanding its Black Mountain lead-zinc mine (near Aggenys, Northern Cape Province); its Gamsberg deposit had ore reserves of 145.3 million tons (6.04% zinc).

Natural gem diamond output in 2000 was 4.75 million carats; and natural industrial diamond, 6.06 million carats. De Beers mines produced 10.29 million carats, from 23.3 million tons of material treated. The Venetia Mine (north of Potgietersrust) recovered 4,497,756 carats at $55 per carat; the Finsch (south of Kimberley, northern Cape), 1,925,059 ($50 per carat); the Premier (east of Pretoria), 1,782,420 ($46 per carat); the Namaqualand (north of Port Nolloth), 809,938 ($159); the Kimberley, 568,639 ($76); the Marsfontein, 436,191 ($165); the Koffiefontein (south of Kimberley), 151,498 ($228); and the Oaks, 116,048 ($165). The country's total diamond reserve base was 1,127 million carats. Alluvial diamonds were discovered along the Orange River in 1867, and surface diamonds, at Kimberley, in 1870; both types were later discovered in other parts of South Africa. The Big Hole Mine, at Kimberley, was the world's largest hand-dug mine; by the time it ceased production, in 1914, 14.5 million carats of diamond had been extracted from 22.6 million tons of earth.

Output of other industrial minerals included chrysotile asbestos, 18,910 tons (51,776 in 1996; three mines were closed); vermiculite, 208,835 tons (221,300 in 1998, and a reserve base of 80 million tons); and limestone and dolomite, 15.9 million tons (22.2 million tons in 1997). South Africa also produced aluminosilicates (andalusite, with a reserve base of 50.8 million tons), barite, calcite, hydraulic cement, clays (attapulgite, bentonite, fire clay, raw and calcined flint clay, and kaolin), feldspar, fluorspar (acid-grade and metallurgical-grade, with a total reserve base of 36 million tons), tiger's eye, gypsum, industrial or glass sand (silica), lime, crude magnesite, mica, nitrogen, perlite, phosphate rock (a reserve base of 2.5 billion tons), natural mineral pigments (ochers and oxides), salt, natural sodium sulfate, dimension stone (granite, norite, and slate), crushed and broken stone (quartzite and shale), aggregate and sand, sulfur, and talc and pyrophyllite (wonderstone). No brick clay was produced in 2000, no nepheline syenite or sillimanite aluminosilicates was produced in 1999–2000, no ceramic-grade fluorspar or crocidolite asbestos, in 1998–2000, and no marble, in 1997–2000. Dimension stone (granite, gabbro, norite, or "black granite," syenite, diabase, and tonalite) was exported to Japan, Italy, Spain, and the Middle East, and accounted for 47% of industrial mineral exports, which earned $194 million in 2000. Other major export commodities were vermiculite, phosphate rock, andalusite, and asbestos.

The wealth derived from the sale of diamonds provided the initial capital for the development of the Witwatersrand gold mines. The market created by the gold mines, in turn, provided the impetus for coal mining, and, later, for the development of the iron and steel industry, which, in its turn, required the development of other minerals. Taxation of mining enterprises has supported South African agriculture, and financed many of the country's administrative and social needs.

The South African minerals industry operated on a free-enterprise, market-driven basis. Government involvement was primarily confined to ownership of the national electric power supply and the national oil and gas exploration company; under the draft Minerals Development Bill of 2000, mineral rights would revert to the state. The bulk of mineral land holdings and production has historically been controlled by five mining investment houses. Since 1994, the industry has undergone a major corporate restructuring, or "unbundling," aimed at simplifying a complex system of interlocking ownership, at establishing separate core-commodity-focused profit centers, and at diversifying and rationalizing nonperforming assets. The move from Johannesburg to London of two major corporate financial headquarters, Anglo American PLC and Billiton PLC, caused concern over "capital flight," and the government in 2000 blocked the $3 billion merger of Gold Fields Ltd. and Franco-Nevada Mining Corp., of Canada; in 2001, though, the government approved a $19 billion takeover of De Beers Consolidated Mines Ltd. by Anglo American.

The 2000 draft minerals bill gave the state exclusive custodianship of all mineral rights and focused on freeing up unexploited mineral rights long held by the major mining houses, to provide more opportunities in the mining sector for black South African entrepreneurial groups ("to redress the results of past racial discrimination and ensure the historically disadvantaged persons participate in the minerals and mining industry"). The Chamber of Mines, which represented the largest sectors of the mining industry, supported the underlying objectives, but expressed concerns about "unintended negative consequences," such as undermining property rights, excessive discretion to a single person (the minister of mines and energy), and offering no right of appeal to the courts. In 2000, a mining summit of government, labor, and industry leaders sought a common vision for the industry and a consensus on ways to improve the industry's job creation potential.

The well-developed railway and port infrastructure was built mainly to transport mineral products, and minerals continued to constitute a major part of the nation's freight. Domestic and foreign investors have committed more than $10 billion to develop and expand new mining and value-added mineral processing capacity by 2007. The impact of HIV/AIDS on the able-bodied skilled and semiskilled work force in the country was of concern to investors. There was also increased attention to environmental issues.