Vote Of Confidence: Glencore Xstrata Makes A Call On SA
The local mining industry has been besieged by numerous challenges, foremost among them being the wildcat strikes that have been devastating to South Africa’s economy. The question to international mining houses is whether South Africa is still a worthy investment destination.
Diversified global mining house Glencore Xstrata seems to think so. In a recent press briefing, the mining house’s CEO Ivan Glasenberg was bullish about commodities, citing Chinese demand as the continued driver for resources.
He added that a lack of large, high-quality mining projects from 2015 onwards is expected to shift the market back into structural deficit, particularly given the number of mine closures that are forecast over the second half of this decade.
With regard to operating and investing in Africa, particularly South Africa, Glasenberg said that this had ‘never been a problem’.
“We are invested in 18 African countries and each one has their own unique challenges. South Africa, with its strikes, is no different. We work around these challenges and we are open to, and engage governments in, dealing with these situations.”
Group executive Clinton Ephron added that the miner was currently speaking with South Africa’s recently elected cabinet and informing them on the issues affecting mining companies, including the proposed amendments to the MPRDA Amendment Bill.
While Glencore Xstrata is not too keen to see major deviations from the proposed MPRDA Bill, it is adopting a ‘wait and see’ approach, he said.
Glencore Xstrata, which is focused on coal, manganese, iron ore, nickel and ferrochrome, listed on the local bourse in November last year – a clear indication that the company is keen to grow its African footprint and increase its investment on the continent.
The miner brings to the South African table much-needed foreign investment, and, in the past three years, Glencore Xstrata had invested between $3bn and $4bn in South Africa, said Ephron.
However, if the operating environment did not allow Glencore Xstrata to make its targeted returns, it would invest elsewhere.
According to Glasenberg, Glencore Xstrata is the biggest coal supplier to Eskom, and delivered 23mt of coal last year to the local power producer.
In fact, the company also has a number of expansion and replacement projects in the pipeline that would increase output both for export and for Eskom.
Interestingly, in response to government’s decision to encourage the establishment of independent power producers, Glencore Xstrata is keen to explore a partnership role with private operators eager to build power stations.
“We are not in the business of building power stations; we are in the business of producing coal, and can operate on both sides of the mix.”
Glasenberg confirmed that Glencore Xstrata was currently working with a partner who intended becoming an independent power producer to deliver into government’s Renewable Energy Independent Power Producer Procurement Programme.
Meanwhile, in response to the possible expansion of its Lion ferrochrome project in Mpumalanga, Glasenberg said that the constraint in local power production was a significant inhibitor to the ferrochrome project’s expansion.
“Should conditions warrant it, there could be a third-phase expansion to the Lion ferrochrome project,” he stated.
Discussing platinum, and, in particular, its 25% stake in Lonmin, Glasenberg stated that Glencore Xstrata would, in the future, look to divest its stake in the beleaguered platinum miner.
Glencore Xstrata’s platinum portfolio includes the Lonmin stake, as well as smaller operations Eland Platinum and the Mototolo joint venture with Anglo American Platinum.
“As platinum is not a core commodity for us, we will look to sell our stake in Lonmin at the right time and at the right price. There is no rush or urgency. We will watch the platinum price and at some stage will get out.”