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South Africa Mining Report Q3 2016

  • July 2016
  • -
  • Business Monitor International
  • -
  • 78 pages

Includes 3 FREE quarterly updates

BMI View: South Africa's mining sector will face persistent headwinds due to labour unrest, mineral priceweakness, further divestments and retrenchment.Latest Updates And Structural Trends

- Coal: As Anglo American is keen to offload the majority of its South-African assets, this could result in asignificant decline in the country's coal production growth. As such, we revised down our 2016 and 2017coal production forecast from 1.3% to -4.0% and 1.0% to -1.5%, respectively. Despite this, South Africa,which is Sub-Saharan Africa (SSA)'s largest coal producer, with a 94.6% share of regional coalproduction in 2015, will remain the region's largest coal producer. We forecast South Africa's coalproduction to grow from 252million tonnes (mnt) in 2016 to 264mnt in 2020. This would representaverage annual growth of 0.1% during 2016-2020, slightly higher than the average 0.9% decline during2010-2014.

- Gold: Although the DRC, Zambia and Mozambique will be the region's growth bright spots, SouthAfrica will remain SSA's largest mining country in terms of MIV.

For instance, South Africa's MIV willtotal USD26.7bn in 2016, whereas DRC, Zambia and Mozambique's MIV will total just USD4.3bn,USD1.3bn and USD0.7bn, respectively. However, South Africa's mining sector will continue to face amyriad of challenges from a combination of low mineral prices, elevated production costs and growingregulatory risks. Both low gold prices and ongoing wage negotiations will continue to hurt the sector'sgrowth output. Beyond 2016, we forecast output to average annual growth of 0.2% during 2016-2020,with output totalling 4.53moz by 2020.

- Iron Ore: We have revised up our iron ore forecasts to 2020. We expect iron ore prices to averageUSD48.0/tonne during 2016 and USD43.0/tonne in 2017, up from our previous forecasts of USD38.0/tonne and USD40.0/tonne, respectively (see: 'Iron Ore: Chinese Stimulus Only Short-Term Boost ToPrices', May 5). Our upwards revision is predicated on the strong H116 iron ore price rally due toincreasing demand from Chinese steel mills. As stated above, we expect prices to fall in the latter half of2016 as Chinese ore demand will weaken due to declining demand from steel producers (see: 'RenewedChina Weakness Will Limit Price Gains', April 26). We expect prices to head lower in 2017 as the H116rally will result in high-cost iron ore producers coming offline at a slower pace than we initially expected.In addition, the global iron ore market is going to continue to see strong supply from low-cost producingcountries Australia and Brazil, the world's second and third largest producers, respectively, which willpartially offset the slowdown in Chinese iron ore production.

- The country's Iron ore exports to China will slow on the back of the country's slowdown in steelproduction over the coming quarters. In the first four months of 2016, ore exports to China fell by 3.0%y-o-y, following 6.2% growth in 2015.

Table Of Contents

South Africa Mining Report Q3 2016
BMI Industry View 7
Table: South Africa Mining Industry Value Forecast 7
Latest Updates And Structural Trends 7
SWOT 9
Industry Forecast 11
Coal: Modest Recovery Post-2016 11
Latest Updates 11
Table: Coal Production Forecast (South Africa 2012-2020) 11
Table: South Africa - Major Coal Projects and Expansions 12
Structural Trends 12
Gold: Growth To Grind To A Halt 18
Latest Updates 18
Table: Gold Production Forecast (South Africa 2012-2020) 18
Structural Trends 19
Iron Ore: Low Prices To Dent Growth 24
Latest Updates 25
Table: Iron Ore Production Forecast (South Africa 2012-2020) 25
Table: South Africa - Major New Iron Ore Projects and Expansions 26
Structural Trends 26
Platinum: Production Downturn Due To Rising Costs 28
Latest Updates 28
Table: South Africa - Platinum Mine Production and Growth 28
Structural Trends 28
Palladium: Sector To Face Numerous Challenges 34
Latest Updates 34
Table: Palladium Production (South Africa 2014-2020) 34
Table: South Africa - Palladium Projects 34
Structural Trends 35
Industry Risk Reward Index 37
South Africa Risk/Reward Index 37
Rewards 37
Risks 37
Africa - Risk/Reward Index 38
Key Takeaways 38
Latest Revisions 39
Table: Africa - Mining Risk/Reward Index 40
Regulatory Development 41
Trade and Investment Risk Analysis 41
Commodities Outlook 45
Table: BMI Commodities Price Forecasts 45
Competitive Landscape 46
Table: South Africa - Largest Mining Companies' Financial Data 47
Company Profile 48
Global Company Strategy - AngloGold Ashanti - Q3 2016 48
Table: Select Commodities - Price Forecasts 50
Company Strategy 52
Table: AngloGold Ashanti - Key Financial Data 53
Global Company Strategy - Anglo American - Q3 2016 54
Table: Select Commodities - Price Forecasts 55
Latest Results 57
Company Strategy 58
Table: Anglo American - Financial Data 60
Global Company Strategy - Impala Platinum - Q3 2016 61
Company Strategy 63
Table: Impala Platinum - Key Financial Data 66
Regional Overview 67
Sub-Saharan Africa Overview 67
Table: SSA - Government Involvement In Mining Sector 73
Methodology 75
Industry Forecast Methodology 75
Sources 76
Risk/Reward Index Methodology 77
Table: Weighting Of Indicators 78

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