After a drop in profits due to pressure on commodity prices — with the exception of gold — in the previous year, South African mining companies are expected to continue their quest for cleaner minerals this year.
The mining industry, which has comprised mainly gold and platinum mines, is positioning itself for the global energy transition which will see a reduction in carbon emissions and a decline in fossil fuels
Izak Odendaal, Old Mutual wealth investment strategist, said mergers and acquisitionswill be driven by the long-term requirements of reducing carbon footprints.
Odendaal said the market expected the green transition and a general increase in investment spending to boost demand for key commodities, including copper, adding that there was currently insufficient supply to meet future demand. Critical minerals include lithium, copper and rare earths metals required in electric vehicles (EV) and wind turbines.
Given the costs and complexities of bringing a new mine to market, it will be cheaper and easier in many cases for big mining houses to buy projects from other companies. This was the key consideration in the BHP’s move on Anglo American. Though the deal fell through, I wouldn’t be surprised if BHP has another go at Anglo at some point.
— Izak Odendaal, Old Mutual wealth investment strategist
“Given the costs and complexities of bringing a new mine to market, it will be cheaper and easier in many cases for big mining houses to buy projects from other companies. This was the key consideration in BHP’s move on Anglo American. Though the deal fell through, I wouldn’t be surprised if BHP has another go at Anglo at some point,” he said.
Mining giant BHP withdrew from its £38.6bn ($49.8bn) takeover bid of Anglo American last year. The Australian group wanted Anglo to unbundle its South African platinum and iron ore businesses. Anglo instead tabled a restructuring plan in which it will focus on copper, premium iron ore and divest from metallurgical coal.
The group plans to unbundle De Beers and Anglo American Platinum.
Last year was a mixed bag for commodities as gold reached an all-time high, underscoring its status as a safe investment option for investors looking to diversify their risk amid rising inflation and geopolitical tensions.
While gold reached new highs, platinum group metals (PGM) prices came under pressure in 2024, with platinum miners implementing restructuring plans and capital deferment programmes to cut costs.
Refilwe Moroka, head of domestic equities at Melville Douglas, Standard Bank’s boutique fund manager, expects gold prices to remain strong in 2025. “Elevated spot prices should be further supported by the safe haven’s attractive fundamentals. Continued central bank buying, elevated geopolitical tension, US fiscal spending/debt ceiling uncertainty and the global interest rate-cutting cycle should all be tailwinds for gold,” she said .
Moroka expects iron ore to remain weak because of a weak Chinese property market, resulting in lower steel demand, elevated inventories and growing supply from major producers in Australia and Brazil. “For PGMs, we do not expect a drastic recovery in prices but believe we are close to the bottom,” she said.
“We would like to see a strong pick-up in automotive demand globally and PGM loadings to turn more bullish. However, EV penetration rates in China continue to show strength which may put a lid on the upside to the PGM basket price.”
While South Africa’s improvement in electricity supply was a plus for the mining sector — as load-shedding was suspended in April — the underperforming logistics network continued to be a headwind.
Transnet Freight Rail is performing below its capacity with rail freight volumes declining to 152Mt in financial 2024 from 226Mt six years earlier.
Seleho Tsatsi, an investment analyst at Anchor Capital, said the question in 2025 really is about whether we’ll see a recovery in China, the world’s second largest economy. “Chinese property and economic growth have come in below expectations for some time. There will be a lot of focus around the size and timing of a recovery. That will be key for commodities like iron ore and met coal,” he said.
Tsatsi said precious metals were likely to remain in the headlines as always. Prices in the PGM space are subdued at present. “Base metals are likely to be tied to growth in China for the most part,” he said.
“In addition, the world’s transition to a greener economy will remain a focus for several important base metals such as copper, aluminiumum and nickel activity in the mining space — it will be interesting to monitor this year. We have seen major diversified miners such as Anglo American, BHP Group and Glencore being active in that regard for some time.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.