7 February 2007

Presentation tothe Select Committee on

Economic and Foreign Affairs

Mzolisi Diliza, Chief Executive,Chamber of Mines of South Africa

7 February 2007

Chamber of Mines of South Africa

22

Outline of presentation

1. The importance of mining to the economy

2. Background to the Chamber of Mines3. The importance of tripartite co-

operation 4. Some challenges facing the industry.

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1. Importance of mining to the economy

Gross Domestic Product (GDP): Directly: 6.2% of GDP Including indirect contribution: 16%

Exports: R105-billion in export earnings 30% of total merchandise exports Including beneficiated mineral products: over

50% of exports 60 different minerals are mined – exported to

over 100 international destinations

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Important provider of jobs

Mining employees:

450 000

Wage bill = R36-billion

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Mining employees:

450 000

Dependants: 5 million

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Associated industries:

150 000Mining

employees: 450 000

Dependants: 5 million

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Importance of mining (continued)

Energy: 93% of electricity generation via coal power plants About 30% of liquid fuels via Sasol’s use of coal

Investment: 12% of fixed investment (direct and indirect) At R1-trillion, 33% of the market value of the JSE Empowerment deals of R30 billion in 2006

Complementary role in deep rural areas: Remittances Clinics, schools, community centres Development projects Financial infrastructure TEBA Development, TEBA Bank

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2. The Chamber of Mines

Vision: To achieve a policy, legislative and governance framework, which is widely supported and which will allow the mining industry to convert as great a part of the country’s abundant mineral resources into wealth for the benefit of South Africa.

A private sector body, fully funded by private companies

Founded in 1889

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Some principles supported by the Chamber

Emphasis on addressing historical legacies

Need for transformation to ensure a more inclusive and participative economy: Mining Charter developed on tripartite basis

Unions are important stakeholders Importance of participating in economic

tripartism Importance of dealing responsibly with an

important national resource.

1010

Chamber transformation2006

Black persons in management and professional (COM)

40%

Women: total management and professional (COM)

47%

Women: total employment (COM)

52%

Women: total employment (12 major mining companies)

7%

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Chamber representation Chamber members account for 90% of

the country’s mineral production and 89% of employment

Chamber approach is fully mandate driven through numerous technical policy committees representing members

Research backing for Chamber views an important priority.

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How the Chamber operates

− President: Lazarus Zim− Vice-presidents:

Ralph Havenstein Bernard Swanepoel

− COM CE: Mzolisi Diliza− Other CEOs

ExecutiveCouncil

Final mandate

on major issues

How the Chamber operates

ExecutiveCouncil

Policy committees • Company experts

• Environment, labour relations, skills development, health, safety, etc.

13

Gold and coal

principals

1414

The advocacy role of the Chamber

Government, Parliament, Parastatals Member of Business Unity South

Africa (BUSA) International role Chamber not a service organisation

(exception of collective bargaining for gold and coal).

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Future of Gold Mining

HIV/AIDSCommittee

Tripartism in theMining Industry

Minerals & MiningDevelopment Board

Mine Health andSafety Council

3. Tripartite co-operation

Sector PartnershipCommittee, Social

Plan, etcMining Summits (past and future)

SustainableDevelopment

issues

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4. Some challenges facing the industry

Health & SafetyIssues

Chamber of MinesSkills devl.

Issues

EconomicIssues

EnvironmentalIssues

Labour relations

Issues

SustainableDevelopment(SD) Issues

• Compliance with the

Minerals Act

•Compliance with Mining Charter

•Beneficiation

TransformationIssues

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• Drop in mining investment

• Input cost pressures

– Energy– Transport– Water

• Royalties.

Some challenges facing the industry


Chamber of MinesSkills devl.

Issues

EconomicIssues

EnvironmentalIssues

Labour relations

Issues



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Chamber of Mines

EconomicIssues

EnvironmentalIssues

Labour relations

Issues




Skills devl.Issues

• Financial Provision for mine closure• Climate change, biodiversity• Water resource management

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• Health & Safety : Milestones• Integration of Health & Safety Laws• Integration of Compensation Systems• HIV/AIDS



Chamber of Mines

EconomicIssues

EnvironmentalIssues

Labour relations

Issues



Skills devl.Issues

2020




Chamber of MinesSkills dev

Issues

EconomicIssues

EnvironmentalIssues

Labour relations

Issues


• Bargaining council for mining industry• Provident Fund• Accommodation• Women in mining

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Issues

EconomicIssues

EnvironmentalIssues

Labour relations

Issues


• Skills shortages• Learnerships and apprentices• Adult literacy• MQA


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• Framework for responsible mining• Gold theft• REACH

Some challenges facing the industryTransformation

Issues



Issues

EconomicIssues

EnvironmentalIssues

Labour relationsIssues


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Major national issueMajor national issue Huge impact on mining industryHuge impact on mining industry Substantial in-roads and interventionsSubstantial in-roads and interventions Provision of antiretroviralsProvision of antiretrovirals 40% – 45% of people in the industry needing 40% – 45% of people in the industry needing

treatment are receiving ittreatment are receiving it 94% of HIV positive employees return to work94% of HIV positive employees return to work

HIV/AIDS

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Employee safety: our major concernEmployee safety: our major concern We deeply regret fatalities and injuriesWe deeply regret fatalities and injuries 2005 – best ever improvement in safety 2005 – best ever improvement in safety

(16%)(16%) 2006 - below 20% improvement objective2006 - below 20% improvement objective High level task team appointedHigh level task team appointed One fatality is one fatality too manyOne fatality is one fatality too many

Safety

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Skills development On average 4.5% of payroll spent on On average 4.5% of payroll spent on

skills developmentskills development Industry contributes about R15m per Industry contributes about R15m per

annum to Minerals Education Trust annum to Minerals Education Trust Fund for tertiary mining educationFund for tertiary mining education

Bursaries in mining: Bursaries in mining: Companies: 700 (R40m)Companies: 700 (R40m) MQA: 837 (R50m)MQA: 837 (R50m)

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SA did not take full advantage of commodities SA did not take full advantage of commodities boomboom

Global exploration expenditure increased by Global exploration expenditure increased by 43% but only 27% in South Africa between 43% but only 27% in South Africa between 2003 and 20052003 and 2005

Commodities boom and lost investment

opportunities

AustraliaAustraliaPre-tax profits increased by Pre-tax profits increased by

95%95%Capital investment surged by Capital investment surged by

more than 34%more than 34%

South AfricaSouth Africa Profits increased by 12% onlyProfits increased by 12% only Real fixed investment declined Real fixed investment declined

by 16.5% (and 18.6% in 2004)by 16.5% (and 18.6% in 2004)

An Australian comparison (2005)

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Some possible reasons Strong Rand (especially in 2003 and 2004) an

important reason Transport:

Logistical constraints in rail and ports compounded the problem

Industry & Transnet agreed initiatives to overcome logistical inhibitors;

Transnet spending R37-billion to upgrade infrastructure in the Waterberg area

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What are the issues? What are the issues? Issuing of new or converted mining rightsIssuing of new or converted mining rights Interpretational differences of Mining Interpretational differences of Mining

Charter, empowerment requirements and Charter, empowerment requirements and Social and Labour PlansSocial and Labour Plans

Capitalisation of Environmental Trust Capitalisation of Environmental Trust FundsFunds

Delays in processing water licencesDelays in processing water licences

Chamber capital investment survey

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Programme of action to address problems

Increasing efficiencies is top priority for DME

Industry is addressing shortcomings with applications, e.g. incomplete applications, lack of transparency on some BEE deals

Joint investigation into investment constraints and solutions

Continuing discussions.

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Positive developments in recent months:Positive developments in recent months: 2495 new prospecting licences granted (94% 2495 new prospecting licences granted (94%

finalised within time frame, i.e. either finalised within time frame, i.e. either granted or refused)granted or refused)

341 mining rights granted (65% finalised)341 mining rights granted (65% finalised) 1025 permit applications granted (84% 1025 permit applications granted (84%

finalised)finalised) Transparency on progress with Transparency on progress with

applicationsapplications 8.3% increase in investment between Q3 8.3% increase in investment between Q3

2005 and Q3 20062005 and Q3 2006

Good news

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Significant improvements in second draft of Royalties Bill are welcomed

However, proposed two-tier system of royalty rates is a concern: Lower rate for refined product But has serious cost consequences for

bulk commodity producers, esp. iron ore and coal.

Royalty concerns

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Industry concerns about prescription of claimsIndustry concerns about prescription of claims Window ends on 30 April 2007Window ends on 30 April 2007 Compensation claims could become unenforceableCompensation claims could become unenforceable Difficulty in assessing value of rightsDifficulty in assessing value of rights Urgent solution required Urgent solution required On-going discussions with the DME to find solutionsOn-going discussions with the DME to find solutions The resolution of Legal Proceedings Against Certain The resolution of Legal Proceedings Against Certain

Organs of State Act (ILPA) set a good precedentOrgans of State Act (ILPA) set a good precedent Urgency of passing legislation before 30 April 2007!Urgency of passing legislation before 30 April 2007!

MPRDA and prescription

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An invitation Chamber and mining industry would

like more interaction with Parliamentary structures

Visits to mines to obtain hands-on information should take place regularly

Chamber is willing to carry a portion of the cost of such visits

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Financial corporationsAnglo American Corporation of South Africa Ltd

Gold miningAfrican Rainbow Minerals (Gold) LtdAngloGold Ashanti LtdArmgold/Harmony JV LtdGold Fields Ltd Beatrix Mining Company Ltd Driefontein Consolidated (Pty) Ltd Kloof Gold Mining Company LtdHarmony Gold Mining Co. LtdJCI Gold LtdPlacer Dome Western Areas JV

Coal mining Anglo Operations Ltd, Anglo Coal Division Eyesizwe Coal (Pty) Ltd Ingwe Coal Corporation Ltd Douglas Colliery Ltd Khutala Mining Services (Pty) Ltd Optimum Colliery Ltd Kangra Group (Pty) Ltd Kumba Resources Ltd Kuyasa Mining (Pty) Ltd Sasol Mining Tweewaters Fuel (Pty) Ltd Xstrata Coal

Diamond miningDe Beers Consolidated Mines LtdNamakwa Diamond CompanySouth African Diamond Producers OrganisationTrans Hex Group LtdPlatinum miningAnglo American Platinum Corporation LtdImpala Platinum LtdLonmin Platinum LtdRidge MiningSmall, medium & emerging operationsASA Metals (Pty) LtdAggregate & Sand Producers Association of South AfricaClay Brick AssociationG & W Base and Industrial Minerals (Pty) LtdImerys South Africa (Pty) LtdMvelephanda ResourcesRandgold & Exploration LtdVametco Mineral Corporation (Pty) LtdOther membersAngloGold Ashanti Health Services (Pty) LtdBHP Billiton (SA) LtdCementation (Africa Contracts) (Pty) LtdCorobrik (Pty) LtdRUC Holdings LtdShaft Sinkers (Pty) LtdSuspended operations City Deep Ltd Consolidated Main Reef Mines & Estates Ltd Crown Mines Ltd

Members of the Chamber of Mines

7 February 2007

Documents

Transcript of 7 February 2007