Mining is a high-risk business in the best of times, but throw in a pandemic, a national lockdown and questionable government leadership and the risks grow exponentially.
As industry and businesses put increasingly vocal pressure on the government to relax the lockdown and let the country get back to work to avert a meltdown in an already embattled economy, there are surreal moments from key ministers.
The latest example is the laughably strange set of regulations from trade & industry minister Ebrahim Patel, released on Tuesday and outlining in painstaking detail what clothing retailers are permitted to sell.
It’s easy to make jokes about his gazetted list, which allows the sale of “short-sleeved knit tops, where promoted and displayed as worn under cardigans and knitwear”, or “crop bottoms worn with boots and leggings”.
But given the brutal realities for businesses and industries anxious to get back to work and generate revenue after seven weeks of highly restricted personal movement in which the economy ground to a halt, it’s no laughing matter at all.
Is this really what is preoccupying Patel’s mind? Crop bottoms, leggings and boots? The petty minutiae?
Executives are beyond frustrated and are now angry, demanding real steps towards reopening the economy.
Neal Froneman, CEO of Sibanye-Stillwater, the world’s largest supplier of platinum group metals and a major private sector employer in SA, could barely control his temper when talking about the handling of the economy during an interview with Business Day.
He was unsparing in his criticism of the government’s inability to put the national interest ahead of narrow political agendas and interests.
The mining sector has the green light to return to 50% of capacity — a term in the regulations which prompted confusion about whether this was staffing levels or production, adding another element of unnecessary confusion at the worst possible time.
Understandably, the government wants to move cautiously in opening a major sector of the economy and one that employs nearly half a million people, mostly in cramped and dangerous environments like the cages dropping them down shafts and the confines of stopes.
That said, the basic economics of mining dictate that this can be nothing more than a short-term, stopgap measure and underground mines need to return to full staffing levels as quickly as possible.
Froneman made the point numerous times that it would have been easier and less risky for Sibanye to keep its underground mines shut until regulations allowed for full operations.
More than two-thirds of the costs of an underground mine are fixed, meaning whether the mine is operating with half or full staffing complements those costs have to be paid regardless.
Analysts point out that half the employees at work in an underground mine will result in roughly half the normal production. Mines simply cannot cover costs and will operate at a loss, which for marginal mines is enormously risky when they don’t know how quickly they’ll be allowed to ramp up to full production.
Companies like Harmony Gold, AngloGold Ashanti and Sibanye are targeting high-grade areas of their mines to try to generate as much revenue as possible to cover costs and justify the opening of the mines.
This creates a problem if the mines are kept at half capacity for a sustained period. These high-grade areas will be exhausted, leaving the lower-grade areas — and a desperate need for fresh development.
Simply put, SA’s deep-level gold mines cannot be high-graded, a virtual swear word in the industry where the best parts of the ore body are picked out. The optimal way to mine is to blend high- and low-grade areas to get an average grams per tonne so that as much of the ore body can be economically extracted over a longer life with extended employment.
No ore development is taking place and it will be a future cost that mining companies will incur to restore the optimal balance of working areas.
There’s another cost to consider.
The return to work of more than 200,000 people in mining entails a comprehensive health and safety programme, starting at the recall of mineworkers, immediate screening, transport to the operations — needing double the normal number of vehicles to ensure social distancing in buses and taxis — and then comprehensive screening when they arrive at the shafts.
If anyone is suspected of the coronavirus, there’s testing, isolation facilities, quarantine, and fully equipped and staffed mine-owned hospitals and clinics.
Mines have to supply all the protective gear, sanitisers, mass temperature-taking units. Increasingly, the industry wants its own coronavirus testing and laboratories to speed up the delivery of test results to properly manage the pandemic.
Essentially, this will mean half a million people who will not have to rely on state and private medical facilities.
This process is not something done out of bleeding-heart altruism but from hard-nosed business pragmatism. The state cannot cope and the mines need to return to work as quickly as possible in the safest way.
The unions are quick to jump on any sign of coronavirus, spouting fiery rhetoric about bosses putting profits before lives.
What is the alternative? People remaining in their communities, at risk of infection and not earning a living wage, or going to a place of work where their health is closely watched and with the best possible available medical facilities?
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