How South Africa Could Have 21 New Mining Listings

SouthAfrica could have 21 new mining listings if foreign mining companies that already operate in this country would also list on the Johannesburg Stock Exchange, the largest stock exchange inAfrica, but one that is shrinking.

The 21 companies are all listed elsewhere, with no listing in SouthAfrica, even though they are mining, developing or exploring in SouthAfrica.

If all 21 listed, there would be a 50% increase in the number of listed mining companies on the JSE,AmaranthCX founder and director Paul Miller calculates in a note to Mining Weekly

Miller contends that a prompt from SouthAfrica’s Mineral Resources and Energy Minister Gwede Mantashe would do the trick.

“The JSE has bent over backwards to make inward dual listings quick, easy and cheap. All we need is a trigger, and moral suasion by the Minister asking the CEO of each of the 21 companies to do so, would be a good place to start,” says Miller, a person of considerable mining finance experience with Nedbank and also operational mining exposure as the former MD of Keaton Energy

Foreign listed mining companies that are producing in South Africa but are not secondarily listed on the JSE, include New York-listedTronox Limited and Sydney-listedTerracom Limited.

Tronox’s Namakwa Sands operations are located in the Western Cape, where its ilmenite, natural rutile, and zircon are transported to the Namakwa Sands Saldanha Bay smelter by rail from an opencast mine and concentration plant in Brand-se-Baai.The ilmenite is processed in furnaces to produce saleable titanium dioxide slag and pig iron, while the zircon and natural rutile are stored on-site for export. Final products are dispatched globally to eitherTronox’s pigment operations or third-party customers through the Port of Saldanha.

TerraCom, through its wholly owned Universal Coal, has six thermal coal assets and one coking coal asset in South Africa, and exports through Richards Bay CoalTerminal and Maputo.Also producing in South Africa but not listed here are diamond mining companies Petra Diamonds, Diamcor and BlueRock Diamonds.

London-listed Petra operates the Cullinan and Finsch diamond mines and has the Koffiefontein diamond mine on care and maintenance. Canada-listed Diamcor has the Krone-Endora diamond mine in Limpopo province, and LondonAim-listed BlueRock Diamonds mines diamonds at Kareevlei in the Northern Cape, northwest of Kimberley

Other producers are Sylvania Platinum, Jupiter Mines, Bushveld Minerals, Mineral Commodities, Kropz, and Bisichi.

LondonAim-listed Sylvania has six chrome beneficiation and platinum group metal (PGM) processing plants, located on both the eastern and western limbs of the Bushveld Igneous Complex as well as various mineral asset development projects on the northern limb of the Bushveld Complex.

Sydney-listed Jupiter Mines’ Tshipi é Ntle operates theTshipi Borwa opencast manganese mine in the Kalahari manganese field of the Northern Cape.

LondonAim-listed Bushveld Minerals is a vertically integrated primary vanadium producer with the Vametco mine, Brits Resource and Mokopane Project and Bushveld Energy, with vanadium redox flow battery technology

Sydney-listed Mineral Commodities has theTormin mineral sands operation on the West Coast of SouthAfrica and the Xolobeni mineral sands project in the Eastern Cape.

LondonAim-listed Kropz has the Elandsfontein phosphate project in the Western Cape and London-listed Bisichi has the Black Wattle coal mining and coal washing operation in Middelburg, Mpumalanga. Explorers listed in foreign countries but not on the JSE are Ivanhoe Mines, Marula Mining and Botswana Diamonds, along withTaung Gold International, Vanadium Resources,Theta Gold, West Wits Mining, ZEB Nickel Corp, URAHoldings, and Platinum Group Metals.

“It has been my view for some time that the delistings versus listings crisis on SApublic markets needs a far more thorough analysis than ‘it is all the JSE's fault and it is their job alone to fix it’- which interestingly enough appears to be exactly what theAssociation for Savings and Investment SouthAfrica (Asisa) and its members seem to think,” says Miller

This week’s Financial Mail reports that SouthAfrica has shed about 20% of its listed companies since 2013 and is down to about 313 listed units.

Miller warns that SouthAfrica is sleepwalking into a situation where the stock exchange will have less than 100 listed companies in 20 years.That is the trajectory. Savings reforms introduced throughAsisa have resulted in the small end of the stock exchange no longer standing a chance of attracting funds.

Less than a dozen institutions, allAsisa members, as well as the Public Investment Corporation of SouthAfrica, now control 90% of SouthAfrica’s R9-trillion of savings.Asisa members in particular are subject to rules that direct investment into the big end of the stock exchange, to the virtual exclusion of the small end.

NationalTreasury, which has put restrictions onAsisa, does not respond to questions and appears disinterested in stock exchanges being places where primary capital can be raised.

Names ofAsisa members listed on its website include 27four Investment Managers Pty,ABSA Financial Services Ltd,Afena Capital Pty,Alexander Forbes Ltd,Allan Gray Pty,Assupol Life Ltd, Coronation Fund Managers Ltd, Discovery Holdings Ltd, FirstRand LifeAssurance Ltd, FoordAsset Management Pty,

Hollard LifeAssurance Ltd, KagisoAsset Management Pty, Liberty Holdings Ltd, MaziAsset Management Pty, Momentum Metropolitan Ltd, Nedbank Wealth, Ninety One SouthAfrica Pty, Oasis Group Holdings Pty, Old Mutual, Prescient Investment Management Pty, Prudential Portfolio Managers Pty, PSG Konsult Ltd and Sanlam Ltd.

These institutions have reportedly grown their assets under management fantastically and individual portfolio managers are reportedly fantastically wealthy individuals. The benefits have flown to investors and the rest of the benefit has gone to institutional fund managers.Those institutional fund managers have size and liquidity limits in what they can invest and they are reportedly very closely managed against benchmarks.

As a consequence, many of them are reportedly referred to as index huggers, with most of their investment decisions not straying very far from the indices.

With the structure of the savings industry anti-entrepreneurship, there is likely to be a continuing decline in the number of smaller companies on the stock exchange, which will effectively become a market for secondary listings of foreign companies, for theTop 40, and for listed products, exchange traded notes and exchange traded funds.

There is huge concern that the JSE will no longer serve its societal purpose as a source of primary capital for growing and expanding companies, be they mining, technology or retail companies. - Mining Weekly

Since the United Nations Climate ChangeAgreement was signed by 196 nations in December 2015, many countries have announced policies to reduce their fossil fuel emissions.

Their commitments are set out in nationally determined actions they’ll be taking to achieve this.

But the transition must navigate political economy tensions, especially in developing countries.

Take SouthAfrica, for example.

It has deep-seated socioeconomic problems such as inequality and unemployment. Its unemployment rate (including people who have given up looking for jobs) is unacceptably high at 42.5%.The country is also among the most unequal in the world.

And inequality remains mostly delineated by “race”.The mainstream economy remains predominantly owned by the white minority almost 30 years

After Democracy

SouthAfrica is under pressure to move from fossil fuels to green energy, with a strong emphasis on renewable sources. It has developed a just energy transition framework and a just investment proposal that has so far yielded €600 million in concessional finance from France and Germany

But the country is yet to formulate a systematic transition plan. Such a plan would be underpinned by a social contract, supported by a broad range of stakeholders and affected groups. Moving to green energy will affect those directly employed in the coal mining sector This is a fifth of those employed in the mining sector.That means 108 000 out of 514 859 people.

The ripple effects of the transition will also be felt across the value chain, from mines to markets and into people’s homes.

Making the green energy transition a success requires that the government pay attention not just to environmental factors, but also to socio-economic needs. It must pay special attention to the effect on workers and people living in mining areas, and the macroeconomic effects of dwindling foreign exchange earnings and taxes.

Ignoring socio-economic issues risks a populist backlash that could slow a necessary transition to a green industrial economy

Socio-economic imperatives

The core mission of South Africa’s shift towards green energy should be to achieve economic growth, rising employment and greater equity and inclusion. It must do all this while minimising social risks.

Agreen energy transition that is not anchored in fairness and inclusivity could potentially multiply socio-economic risks.

Any efforts to move away from fossil fuels must cover three key areas.

Retrain workers in the coal industry who will be retrenched in the process, and offer them an alternative source of livelihood.The transition, as the World Bank proposes, requires a “whole-of-society” approach. This should entail engagements with everyone who is affected to ensure that no one is left behind. Promote inclusive supply chains to enable greater participation of small, micro and medium enterprises, especially in small equipment manufacturing activities, installation, civil works, retail and maintenance.

The Organisation for Economic Cooperation and Development notes that small and medium enterprises can be important drivers of green and inclusive growth.They can be encouraged to adopt green strategies as part of their preconditions for participating in the supply chains of major firms.

Enhance energy security by attracting investment into other cleaner sources of energy. For example, the European Union is considering reclassifying nuclear as part of green energy. Major countries such as France insist on “technology neutrality” to include nuclear and hydrogen in their energy mix, rather than to privilege solar and wind energy sources that do not have baseload (the amount of power made available by an energy producer). Lack of baseload compromises energy security

Renewable energy sources provide intermittent power, depending on the availability of sun or wind, whereas average demand requires consistent supply. Europe’s predicament in the wake of Russia’s war on Ukraine best illustrates this: as soon as Russia throttled Europe’s gas supply, governments rationed electricity to curb demand. Or they ramped up the demand for coal from countries such as Colombia, Australia and SouthAfrica to ensure baseload.

Awide lens

As countries march towards a brave new world of green technologies, they must ensure that those left behind, and trapped at the bottom of the old industrial economy, are at the helm of the new economy.The transition to the ideal state must reflect a broad energy mix, rather than leaning on a narrow set of technologies that may not adequately offer energy security or produce just and equitable outcomes.

SouthAfrica must balance environmental concerns, socioeconomic imperatives and energy security in its transition strategies.

For this to be possible, the answer, according to the World Economic Forum, will probably have to be a combination of institutional capacity building, well-chosen policies and a substantial contribution by the international community — technologically as well as financially

This article is republished from The Conversation under a Creative Commons license.The Mail & Guardian