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Business In The News South Africa

Regulatory uncertainty and strong rand impact on mining production, says Chamber of Mines

JOHANNESBURG, August 11 – The Chamber of Mines has pointed to commodity prices and the strengthening of the rand exchange rate as the reason for the year-on-year decline in mining production for June.

Statistics South Africa said on Thursday that mining production had decreased by 2.6 percent year-on-year in June compared to the same period last year, with the platinum group metals being the largest negative contributor, contributing -3.0 percentage points.

This was a  a third consecutive monthly contraction in mining production, having declined 0.2 percent in May and 1.4 percent in April.

The Chamber said there was no doubt that this decline was largely explained by a combination of the uncertainty regarding commodity prices and the strengthening of the rand exchange rate against the dollar.

The rand was on average nearly 16 percent stronger against the dollar over the first seven months of 2017, compared to last year. It strengthened by over five percent since January, eroding the slight improvement in commodity prices.

Rand commodity prices lead production volumes. The chamber said it had expected production volumes to decline further in June as the landed prices continued to decline.

Henk Langenhoven, the chamber’s chief economist, said trends in commodity prices and the performance of the rand have an enormous impact on the mining sector’s profitability.

“Any additional uncertainties, like the potential electricity price increase as well as the legal and regulatory uncertainty relating to the Department of Mineral Resources’ Mining Charter detracts from to the sustainability of the sector,” Langenhoven said..

“The latest announcements of mine closures and further potential closures are serious signs of this.”

The chamber has interdicted the implementation of the Reviewed Mining Charter which sets new black ownership targets for the industry. Its provisions include that new mining rights holders have 30 percent black ownership shared amongst employees, communities and black entrepreneurs.

– African News Agency (ANA)

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