Tuesday, October 20, 2020

Mining commodities performance on a See-Saw

Global head in Commodities research at Standard Bank Walter De Wet says there was mixed production performance which was recorded between 2010 and 2014 among Botswana’s prominent mining commodities. De Wet said this at the recently held Mining and Metals conference.

The commodities include diamonds, coal, nickel, copper and Gold. Coal, as was shown, registered the highest percentage change increase, at 73 percent whereas diamonds reflected a lower percentage change increase at 12 percent. Gold and nickel on the other hand registered a decline in percentage change within the same range at 46 percent and 40 percent respectively. According to De Wet, nickel has recovered but however not a sustainable rally. He anticipates that coal will in the next 12 to 18 months become a driver in the mining sector specifically from a substitution perspective and not from a price standpoint.

De Wet also cautioned that mining companies should not get too excited at the improvement of coal prices as this is not sustainable. China is expected to register a growth of around 6 percent, which although lower than the double digit growth recorded in 2012, is by today’s global economy standard considered substantial. The trickledown effect of an improvement in the Chinese economy is that consumption, of example commodities such as coal, will increase. In terms of diamonds, Botswana remains the second largest diamond producer after Russia, and was cited to account for 19.6 percent of global diamond production. Regarding the outlook of diamonds and coal, De Wet presented that “according to Business Monitor Intelligence (BMI) diamond production is expected to contract in the short term as leading miners such as Debswana scale back capacity, due to current price weakness. Coal production at a CAGR of 15.2 percent over 2016 to 4.4 million tones.”  

Broadly speaking, De Wet cited that mining accounted for 14 percent of Africa’s Gross Domestic Product (GDP). Specific to Botswana, he presented that the mining sector contribution to GDP decreased to 18.3 percent in 2015 from 24 percent in 2014 due to a 15.6 percent decline in diamond production and 35 percent reduction in copper output. Due to the existing mining output, De Wet said, manufacturing has as a consequence experienced a reduction. This is because of the backward and forward linkages of manufacturing with the mining sector, he explained.   

Regarding recent developments in the local mining sector, government is said to have approved an environmental impact statement in May for the country’s first uranium mine “Letlhakane Uranium project” by Australia based A-cap. 

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