Every year, the Chamber of Mines asks mining executives about the trends in their industry and how confident they are about the coming year. The survey also takes their recommendations on how to grow the industry.
Here is what the latest State of Mining Industry Report is telling us about the sector, the country’s biggest foreign currency earner.
More confident, but..
The report’s Mining Business Confidence Index, which measures how confident miners are about the coming year, is +5.4 this year, an improvement from -0.3 this time last year. This means miners are more confident than they were this time last year. This confidence is driven mostly by their expectations of better commodity prices next year, unsurprising given the surge in gold prices this year and projections of a recovery in platinum.
Most expect to invest more capital in 2025 than they did this year.
Policy: Same old same old
Miners don’t expect government’s economic policies to be any better. Some 90% of them think fiscal policies don’t help the industry. The confidence index for fiscal regime’s prospects for 2025 is under zero at -5.9. This means miners are pessimistic that the fiscal regime will change. This includes issues such as royalties, taxes, and the exchange rate. Some 85% do not expect the investment environment to be more competitive in 2025.
The majority of miners, 94%, expect access to foreign currency to either worsen or remain depressed in 2025.
Approximately 73% of the respondents expect the economy to either maintain the same growth trajectory or improve in 2025.
Higher revenue, higher production expected
Miners expect revenue to rise 10% to US$6 billion in 2025 from about US$5.5 billion in 2024, due to anticipated better prices. The majority of miners, 80%, expect to increase production in 2025 by an average 20%. Most expect mineral output to grow by an average of 7% in next year. They see capacity utilisation at 90% in 2025, up from 84% in 2024.
However, 40% of surveyed miners expect to make less profit next year, due to rising costs, which they see rising by 8% next year.
Miners expect to spend US$600 million on expansion projects.
Power worries
Of all the costs, miners worry over power the most. They pay USc14.21/KWh with a peak tariff of around USc19/KWh. During power cuts, they use diesel power, which has an implied tariff of over USc30/kwh. Some 93% of mining executives prefer a tariff of less than USc10/kwh.
They say the mining industry is losing up to 10% of potential output due to power outages.
“Analysis of survey data show that the mining industry is estimated to have a lost of around US$ 500 million of potential revenue due to output losses arising from power outages,” says the report.
What do they recommend
Miners get 75% of their export earnings in USD, and the other 25% in ZiG. Because of the local currency’s rapid loss of value, the surrender portion of their earnings is eroded by over 50%. They estimate this is equal to a 12% tax on exporters’ gross proceeds.
The miners also say royalties are too high. Large scale gold miners pay up to 5% of revenue as royalty. Lithium miners pay 5%, diamond producers 10%, and platinum 7%. Miners recommend lower royalties, based on metal price movements. They recommend 2% for lithium, capped at 3%, 2.5% for platinum with a maximum of 5% if prices rise, and 7% for diamonds.
Mines want the retention level increased from 75% to 85%.
