Modern Mining October 2021

Africa’s mining sector

prices and improved production after mines largely returned to pre-COVID-19 production levels. Production The current period saw production increase by 6% YoY. Although the overall production for the year to June was still marginally below 2019, monthly pro- duction levels over the last six months were above the 2019 levels. Manganese ore was the largest positive contrib- utor with an average of 20% increase in output as operations recovered from an extended shutdown in response to COVID-19 restrictions and market condi- tions. Diamond production grew the largest by 30%. Coal has seen the biggest drop in production from the prior year at an average of 6%. Transitioning to a cleaner economy As South Africa navigates its way through its transi- tion to a cleaner economy, there are several factors to consider. The transition comes with employment opportunities in cleaner energy industries, such as renewable energy and battery storage. It is key that these opportunities are maximised to the fullest

metals basket, iron ore and more recently, coal, it was no surprise that the industry’s financial perfor- mance exceeded expectations on most fronts. High prices can only be utilised if you can deliver into them and the SA mining industry did well to recover production levels to be at or above 2019 levels. The average EBITDA margin of the mining compa- nies included in PwC’s analysis was 46% compared to 27% in the prior year. At these margins mining companies are faced with interesting capital alloca- tion decisions. Maintaining discipline and following through on long term strategies remain key. The aggregate tax expense for the mining com- panies was R91-billion with an effective tax rate of 27%. This represents a staggering 250% increase from the previous period and was driven by the increased profitability of the mining sector. Taxes paid increased by 258%. The increase in revenue also resulted in royalty taxes of R21-billion being paid in the current year. This represents a 146% increase from the prior year. Net profit grew to R274-billion, which represents a 285% increase, because of the increased commodity

Above: The growth in SA’s mining industry confirms the resilient nature of the sector. Photo by Albert Hyseni on Unsplash Left: The mining sector was one of the most resilient sectors, emerging strongly despite COVID-19 restrictions to deliver record financial results.

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