With an exposure in mining and base metals currently at R39 billion, the Industrial Development Corporation (IDC) looks well into the future when planning its strategy for industrial growth, which brings with it job creation and job preservation.
Rian Coetzee, the strategic business unit head: basic metals and mining at the IDC, says: “What makes our approach unique is that we really take a long-term view. We know commodity markets go up and down and people move in and out of sectors. The IDC has a strategic position based on where we want this industry to grow towards and we invest accordingly.”
Coetzee believes the corporation is also uniquely placed to participate early in projects, which is one of its value propositions that isn’t adequately exploited in the industry.
“Quite often, given the tight economic conditions globally, boards say ‘let’s delay this feasibility study to get out of this tight spot’. The IDC can participate at that stage of a potential project to determine its viability. This enables those companies to stick to their growth strategy in a very constrained macroeconomic environment.”
In terms of the IDC’s current investments, Coetzee says: “In the current financial year which ends in March we have already approved funding for about R3 billion of investments in the mining and base metals value chain.”
He says one such investment is in a new technology that enables the exploitation of previously unusable superfine iron ore and tailings by delivering low-cost metallic iron units to the steel industry.
The IDC is building a pilot plant to do this in Phalaborwa in Limpopo. Another significant investment in this financial year is in the platinum sector.
“One of the most notable transactions was a R500 million transaction with Northan Platinum to develop its Eland Mine in the North West, close to Brits. This will create more than 2 000 jobs in an area that is quite depressed.
“We are also very glad with the movement of platinum group metals prices (PGM) in the last few months which creates new opportunities for these mines to be expanded and developed.”
THE CURRENT EXPOSURE AND COMMITMENTS OF THE IDC’S BASE METALS AND MINING PORTFOLIO
Of the unit’s R39 billion portfolio, 72% of it is in coal, manganese, PGMs and basic iron and steel products. The diversification in its interests means that while it supports the important supply of coal to Eskom, the IDC is also investing in minerals and metals used in new technologies – for example in making batteries and energy storage.
“We believe that this large exposure into this sector is so important because basic metals and mining create the bedrock of industrial development in a country. So many value chains utilise raw materials that are derived from mining products,” says Coetzee.
Part of the IDC’s mandate is to also make strategic investments in the rest of Africa (RoA). One of these is a startup tin mine – Alphamin Bisie – in the Democratic Republic of Congo (DRC).
“It was a ground-breaking project, a real green field development in the DRC. The construction is concluded and the mining has started.
“Tin is one of those metals that is quite important in the new applications of minerals. We are talking specifically around its utilisation in electronics replacing lead as a solder.
DISBURSED INTO THE BASE METALS AND MINING SECTOR IN THE PAST FIVE YEARS
“For example, we see a trend towards electric vehicles. Although it has stalled a bit in the last year, we believe there is a long-term structural move towards them and batteries require various commodities such as nickel, cobalt, and we, of course, support these industries as well.”
Coetzee explains investing in the RoA goes beyond creating regional trade, it is also about injecting South African content into those operations, whether this takes the form of South African skills or our raw materials, which ultimately create value chains on the continent.
“There’s no point in exporting the cobalt from the DRC to Japan or Europe to produce the battery and then we import the battery back here, for example.
“So, the whole idea is to create those value chains so that we do the value addition and beneficiation also – hopefully in South Africa, or at least on the continent.
“So that is the key objective for why we make these continental investments.”
The IDC focuses on increasing ownership in business by young people, women and on growing more black industrialists. In the mining sector, this can be more of a challenge given the sector’s unique barriers to entry.
THE AMOUNT OF APPROVALS SINCE MARCH 2019
THE AMOUNT OF APPROVALS SINCE MARCH 2019
“What we quite often do, especially with the young people, is that we facilitate partnerships between established mining companies or players to mitigate the inexperience of the youngsters.
“It is something we’d like to see the private sector be more involved with. We have played quite a meaningful role, especially in the coal sector where Eskom required increased black participation in its supply and most of our investments involve black groupings with preference given to black industrialists.
“We make sure that our investments comply with the undertakings in our client’s social and labour plans involving their workers and the surrounding communities. What differentiates our investments is that we focus on what the developmental and social impact of the investment will be,” Coetzee says.
As global attitudes shift and South Africa faces up to its energy and water challenges, a key component of the IDC’s due diligence is to investigate an operation’s water and energy footprint.
This ties into global competitiveness.
“What is important – especially in our unit – is new technologies – to develop those that utilise less power and water. The technology endeavours to leverage a novel, competitive process that can process a wide range of platinum concentrates at lower operating and capital costs. The Kell technology is an innovative hydrometallurgical process that potentially displaces the traditional [pyrometallurgical] smelting process for platinum group metals. It is a leap forward in on-site metals processing and refining technology.
“This also ties into the importance of providing assistance to mines or to industry players to adopt new technologies in mining, which is becoming quite a competitive feature globally.
JOBS CREATED THROUGH INVESTMENTS IN BASE METALS AND MINING IN THE PAST FIVE YEARS
“It is a very sensitive issue because we need to have a just transition. We don’t want to see people losing jobs because of technology. But we need to start transforming to the latest, more efficient, lower-cost mining technologies and to bring these into our production in South African.”
Coetzee says that the imperative is to balance the need to save and create jobs with the overall competitiveness of the industry.
“I do not forsee a big bang approach, suddenly mines close or convert to new technologies and people lose their jobs.
“Rather it will be an incremental shift. However, we also believe that by investing in new technologies the competitiveness of the industry will increase. That will also create more opportunities for new mines in terms of moving down the cost curve of those resources. And this will enable the industry to grow and ultimately create more jobs,” he says.
- The IDC mining and base metals team will be at this year’s Mining Indaba at Cape Town’s International Convention Centre from February 3 to 6. Find them at stall 209