South Africa’s mining sector investment climate has improved, said Pan African Resources CEO Cobus Loots on Friday, highlighting that the gold miner was set to benefit from years of investment into alternative electricity, which would lower production costs.
Eskom electricity supplies have improved but the Minerals Council South Africa is concerned about the cost of electricity.
On the other hand, Pan African Resources has solar power plants and has a renewable power supply agreement for another.
“We were the first miner to commission large scale solar mine at Evander. We are accruing savings of R4 million a month in terms of solar,” said Loots.
Other miners in SA, he added, have been slow to deepen investment over the past few years due to elevated uncertainty
“Many other miners in our view have underspend on capital and development over last 10 years and they have to play catch up now. Its not the case with Pan African as we have invested a lot in our portfolio and we are poised to start reaping those benefits in the years ahead,” explained Loots.
This has coincided with an improvement in the investment and operating environment for SA. Other executives in SA also say there has been an improvement in business and investment sentiment post the May 29 elections, which resulted in a business-friendly Government of National Unity (GNU).
“There have been a couple of positive developments to South Africa’s operating environment. There is also improved investor sentiment since elections in May,” said Loots.
These positives included an improvement in electricity supply, improvements in ports and rail operations under Transnet, and some certainty to labour after Pan African Resources signed a five-year wage deal for the Barbeton mine, which gave workers a 5.3% salary increment per year.
However, major drawbacks to this included rampant illegal mining, which often sees illegal miners foraging into mines operated by registered operators.
“Illegal mining continues to be of concern and plans are in place to manage the continued onslaught,” Loots said.
However, overall, Loots said “It feels like the sentiment on South Africa as an investment destination” was improving.
DRDGold CEO, Niël Pretorius also told Business Report recently that conditions for raising capital in SA have improved although finance institutions are still being strict with their due diligence procedures and processes.
Loots said Pan African Resources had a long track record of operating in SA, adding that its prospects had also been brightened by the currently elevated gold prices.
“We think SA will attract more international investment. Given current gold prices and the good performance in the past year in terms of earnings and balance sheet, we can expect to have even further improved results in the year ahead,” he said.
The gold miner’s “margins have improved over the last year” on the back of obtaining high gold prices.
BUSINESS REPORT