South Africa, platinum mining giant, is about to fall off the investment map, says Dave Forest of Pierce Points. Until the country sorts out its labor politics, there is a real need to establish alternative sources of platinum group metals, vanadium and manganese. In other words, while it's a bad time to be a miner in South Africa, it's a good time to hold in-ground reserves. In this interview with The Metals Report, Forest names deposits in the Americas and elsewhere in Africa with the potential to meet global platinum needs. But he's choosing carefully, because even in times of scarcity, Forest argues, it just won't do to develop anything other than the best, most economic mining projects.
The Metals Report: You recently wrote, "Many of the global threads in the minerals industry are today running through South Africa." How crucial is South Africa to commodities and, especially, the so-called strategic minerals?
Dave Forest: There may be no other country that is as important to the mineral industry as South Africa in terms of across-the-board production share. It produces about 70% of the world's platinum. There is no other major commodity that is so geographically concentrated. South Africa also produces a lot of the world's strategic minerals, such as vanadium, manganese and titanium.
TMR: Nelson Mandela was close to death recently. Many have worried that his death will result in a civil crisis. What do you think?
DF: South Africa has so many unresolved systemic and structural issues. Mandela's death could serve as a flashpoint. It could be a number of other things.
TMR: When you read about the president of the African National Congress (ANC) singing "Umshini Wami (Bring Me My Machine Gun)," this suggests a high possibility of political turmoil.
DF: Absolutely. The labor unions have been incredibly militant. The difference between what they're asking for and what the companies are offering them is 150% compared to 5%. That's a very big disconnect.
TMR: What is the significance of possible changes to South Africa's Mineral and Petroleum Resources Development Act?
DF: The old minerals code has always been faulted for being vague. The government issued a new draft code last year. Mining companies raised somewhere in the neighborhood of 80 objections to different parts of the act and submitted them to the government. The revised draft released this summer ignored almost all of these objections.
TMR: When can we expect government action?
DF: Pretty soon. The government is taking comments on the revised act until Sept. 6. So we could see action this year.
TMR: How strong is resource nationalism in South Africa, particularly in government circles?
DF: South Africa has one of the highest electric-power costs on earth. So there is a lot of talk about coal, which is used to generate a good portion of this power, being declared a strategic material, if not outright nationalized. This would have a major effect on the global thermal market because South Africa is a pretty significant swing supplier, especially in the Indian Ocean and Asian spheres.
TMR: The National Union of Mine Workers (NUM) has announced a vote on possible strike action. How important would such a strike be?
DF: We had strikes over the last year. They had a material impact on the balance sheets of all the mining companies involved. You're talking about losing a month or two of production. This is especially worrisome in South Africa because it has a lot of older, deeper mines. Once you turn off the switch, it gets harder to turn it back on. These mines need constant maintenance. If they don't get that, you run a real risk of permanent operational damage.