The mine of the future has arrived

Written by Ciaran Ryan. Posted in Journalism

This article first appeared in Moneyweb.

Most mines would be happy to shave 2% or 3% off production costs, but automated mining will make the once dormant Syama mine sold by Randgold to Australia-based Resolute Mining 20% to 30% more efficient. Picture: Supplied

This would’ve been the stuff of wild imaginings just a few years ago: a fully automated mine with not a soul in sight, except in a control room located on the surface.

Operating at more than a kilometre underground at the Syama mine in Mali, driverless laser-guided vehicles make their way from the surface along decline ramps to rendezvous with driverless loaders to collect ore and return to the surface where it is crushed, milled and processed.

“This is a world first for automated mining,” says John Welborn, CEO of Australia-based Resolute Mining, which expects to produce 300 000 ounces of gold a year once underground production kicks off at Syama in June this year. Speaking at the Mining Indaba in Cape Town this week, Welborn outlined how technology in mining has finally entered the digital age. Syama, with a projected 14-year life span, expects to produce gold for an all-in cost of US$746 an ounce. That’s a fabulous price for an underground mine in today’s market.

A single operator sitting in a control room on the surface can supervise up to eight trucks remotely, ensuring there is minimal truck downtime.

Resolute acquired the dormant Syama mine from Randgold Resources in 2004 at a time when the gold price was US$350/oz, a fraction of its current level. This has turned out to be a sweet deal for Resolute, which subsequently discovered vast underground resources that became payable as the gold price improved.

Envy

Though drilling and blasting can also be fully automated, this is the one area where Syama will continue to employ humans, says Tal Zarum, head of programmes automation at Sandvik, which is partnering with Resolute to develop autonomous mining solutions. While most mines are happy to shave 2% or 3% off production costs, Syama will be 20% to 30% more efficient than conventional mining methods. Gold miners around the world must be watching this with envy.

One major efficiency at Syama is the virtual elimination of ‘smoke hours’ after blasting, where dust is required to settle before miners can return to the newly blasted area. Driverless trucks are guided by lasers rather than visual cues, so the presence of dust does not interrupt their progress. On the mine surface they are guided by GPS.

Is this the future of small town South Africa?

Written by Ciaran Ryan. Posted in Journalism

When the taps run dry and the lights go out.

This article first appeared in Moneyweb

Increasing municipal debt is being identified as a key strategic risk. Picture: Naashon Zalk, Bloomberg

The residents of Bethal, a small farming town in Mpumalanga, know what it is like to live without water. Rand Water reduced the water pressure by 40% in December when the Govan Mbeki Municipality missed payment on its arrears bill of R88 million.

When the taps run dry, schools and businesses close down. Parts of the town still have access to water, but most do not. On Saturday the municipality turned the water back on, but no one knows how long this will last. Local businesses and farmers have come together to solve the problem, trucking in water from surrounding boreholes to supply the town. Local residents have resorted to hauling buckets of water to their homes for washing and cooking. The town’s abattoir was shut down because it could not get water.

A week ago residents marched on the municipal headquarters demanding to know why the water bill has not been paid and when the taps would be turned on again. “We are expecting the lights to go out soon,” says Michelle Rademeyer, a local resident planning to campaign in the upcoming elections for Freedom Front Plus (FF+). There’s a good chance she will clean up in the election, given the level of disaffection with the current municipal leadership. Many residents suspect corruption as the cause of their dry taps. “We may be able to do without lights, but we cannot do without water,” says Rademeyer.

Local government an ‘irrelevance’

The local government has ceased to function, adds local town councillor Aranda Nel-Buitdendag. When that happens, residents take it upon themselves to provide basic services such as water supply and emergency services. The local government has become an irrelevance, or worse, an obstruction to daily life.

Residents know who to blame, and the ruling ANC can expect a thrashing in Bethal come election time. Smaller parties such as FF+ and the Economic Freedom fighters (EFF) are expected to gorge themselves on this mess.

Rand Water supplies bulk portable water to 17 municipalities in Gauteng, Mpumalanga, North West and the Free State. As of January 23, it was owed R708 million in arrears. Bushbuckridge Municipality, also in Mpumalanga, has had its water flow reduced by 20%. Worst affected is Victor Khanye Municipality, also in Mpumalanga, where water flow has been reduced 60%, impacting the surrounding areas of Delmas, Botleng, Eloff and Sundra. It owes Rand Water about R86 million in arrears.

Asked whether the delinquent municipalities were managing to catch up on the arrears, Rand Water cryptically replied: “Some municipalities have been improving and adhering to the repayment arrangements [more] than others.”

Other towns in Mpumalanga dependent on coal mining have been devastated, but for different reasons. Blinkpan, which abuts the Koornfontein Coal Mine, has been in virtual shutdown since workers stopped getting paid in October last year. Koornfontein, like its sister mine Optimum, forms part of the Tegeta group, once owned by the Guptas. Both mines were placed in business rescue in February 2018.

The witch trials of Megawatt Park

Written by Ciaran Ryan. Posted in Journalism

This article first appeared in Moneyweb.

Matshela Koko, the former acting CEO of Eskom once described as ‘the face of corruption’, recently tweeted out a chart showing operational performance under different Eskom management teams.

The chart shows power generation performance, which has been in steady decline since 2000 but improved sharply once Koko and then-chair Brian Molefe took over. Load shedding also stopped during their tenure between 2015 and 2017.

Performance has just as abruptly taken a turn for the worse since Jabu Mabuza and Phakamani Hadebe have taken control of the electricity company. The chart is extremely flattering to Koko and Molefe.

Source: Matshela Koko (via Twitter)

Koko and Molefe were maligned in the press and by political parties as ‘Gupta stooges’. The deal that sank their careers at Eskom was a coal supply agreement concluded with Gupta-owned Tegeta (now in business rescue), which was presumed to be corrupt. Glencore, the former owner of Optimum Coal Mine, became a forced seller when it was slapped by Eskom with a R2.1 billion fine for the supply of sub-standard coal to Hendrina Power Station. In stepped the Guptas, who, with no money of their own, managed to pick up Optimum with a R1.6 billion guarantee from Eskom and a coal pre-payment of R658 million.

On the face of it, it looked dirty as all hell. Eskom had acted as an enabler in what amounted to the theft of a key Glencore asset.

Reality is somewhat more nuanced. Firstly, the Eskom fine has not gone away but may end up being substantially less than R2.1 billion, as Optimum – now also in business rescue – hunts for a new buyer who will want to make peace with Eskom. Secondly, Eskom’s coal costs had been escalating at 17% a year since 2008 and Koko made it a priority to bring this under control. He contacted Eskom’s mining suppliers and laid down the law: the average delivered cost was to be no more than R437 per ton, which was the average cost of good quality coal for Eskom at the time.

Joburg prisoners claim officials are violating court order to feed them properly

Written by Ciaran Ryan. Posted in Journalism

This article first appeared at GroundUp.

Inmates at Johannesburg “Sun City” Medium B prison say prison authorities are violating a court order issued by Acting Judge SM Wentzel in June 2018 that ordered the Department of Correctional Services (DCS) to serve three meals properly spaced throughout the day.

In January 2018 inmates complained to Acting Judge Wentzel in the South Gauteng High Court that they were going 20 hours between meals because of lack of staff. They were being served lunch and supper (consisting of bread and jam for the most part) at 1pm each day. This was expected to last until breakfast the following morning.

In a damning judgment Wentzel ordered DCS to ensure prisoners were served three meals a day, properly spaced throughout the day. She also stated that “it is high time” that inmates were served a hot meal of meat and vegetables in the evening “to sustain them”.

While the inmates are now receiving three evenly-spaced meals a day, they say that instead of a hot meal of meat and vegetables they are served bread and a sachet of juice powder.

Inmates say the refusal of prison authorities to honour Wentzel’s court order violates their human rights and the Correctional Services Act. The Act requires food to “be well prepared” and to be “served at intervals of not less than four and a half hours and not more than 14 hours between the evening meal and breakfast during each 24-hour period.”

The DCS has a completely different interpretation of Wentzel’s judgment. “The department was never ordered to serve a specific kind of meal for dinner. In terms of the court order, the department was ordered to serve three meals and also comply with the Correctional Services Act in terms of intervals between meals. The order has since been implemented effective from 6 September 2018. Inmates are served three meals which are spaced accordingly as per the court order,” says the DCS.

While Wentzel does make specific reference to a hot meal of meat and vegetables in her judgment, she did not include it within the order.

The Participative Management Committee (PMC), representing the inmates, last week attempted to bring an urgent application before the South Gauteng High Court to force prison authorities to honour Wentzel’s court order.

However, they say their efforts were sabotaged when the prison failed to arrange transport to the court. Judge President Dunstan Mlambo saw no urgency in the matter, which has now been set down on the normal roll.

Lucas Mokholo, head of the PMC, says inmates have been victimised for daring to take prison authorities to court. They have been subjected to indiscriminate cell raids that tried to humiliate them and “physically molest them in the cruellest way possible.”

The prisoners also claim to have been uprooted in the middle of the night and transferred to other prisons, without following due process or the requirements of the Correctional Services Act.

The PMC’s court application states that prison officials “proudly informed all and sundry that no judge will come and tell them how to run and/or execute laws” within the prison.

When PMC members attempted to bring the matter to court in November 2018, they arrived too late to argue their case. In papers filed before the court, they argue that one of the paroled PMC members managed to make it to court in time, only to hear that the other PMC members would not be in court as they had been transferred to other prisons. This was a lie, they argue.

Furthermore, the PMC’s court file had inexplicably disappeared from the court. Inmates say this was orchestrated by prison officials to frustrate its attempt to seek justice.

Responding to the claim that prisoners were prevented from travelling to court to have their matter heard, the DCS says according to its records, no requisition was made for the inmates to travel to court.

“In terms of departmental policies, whenever inmates intend to approach the courts on their own initiative, they are required to do so through their lawyers or family members. It is only when the courts request their appearance in court that the department has a duty to transport them. The department prides itself with its efforts towards ensuring that the rights of inmates are respected and upheld at all times. The allegation that the department is deliberately sabotaging the case and their rights is untrue.”

In response to questions from GroundUp, the DCS in Gauteng says it notes with great concern the allegations of harassment of inmates involved in litigation against the prison. “So far, we have no knowledge of any harassment in that regard because no complaint has been lodged regarding the allegation. However, we will look into the matter.

“General and surprise searches are part of the Correctional Services routine which is done to enhance security and to minimise criminal activities which may take place within correctional centres. It is done to ensure a safe and secure environment for officials, offenders and the public at large.”

Ironically, facilities company Bosasa (now called African Global) – which has been the subject of damning corruption allegations at the Zondo commission of inquiry into state capture – is the company responsible for providing meals at the prison. Mokholo says the PMC will apply to the Zondo Commission to provide testimony on behalf of prisoners relating to African Global.

Zimbabwe inflation hits 50% as Zanu-PF big-wigs milk crisis

Written by Ciaran Ryan. Posted in Uncategorized

This article first appeared in Moneyweb.

South Africans tuning into the Zondo Commission of Inquiry into State Capture may be horrified at the depth and extent of corruption alleged to have infested our government – but Zimbabwe is at a whole different level.

To take just one example: those with access to foreign currency allowances approved by the Reserve Bank of Zimbabwe, mostly those with top level Zanu-PF connections, were able purchase fuel at US$0.45 a litre in Zimbabwe and sell it in South Africa at US$1.20/l and in Zambia at US$1.10/l.

It doesn’t take long to become a dollar millionaire with that kind of arbitrage opportunity. It is the same story with maize meal, bread, flour, cooking oil and other basics. Connected Zimbabweans are making millions while ordinary people – or at least those with fixed salaried jobs – are paying 50-100% more for basic goods. They can barely feed their families.

This explains the recent rioting and violence in the country, says Bulawayo-based economist Eddie Cross. The country is a cesspool of infighting and intrigue, with President Emmerson Mnangagwa fighting rearguard action against his enemies who see an opportunity to unseat him.

“One of the problems we have here is open conflict between the ministry of finance and the Reserve Bank of Zimbabwe,” says Cross. “The Reserve Bank recently announced it is taking 50% of export proceeds from companies like Zimplats and offering them artificial exchange rates which are less than a third of their real value.

Export industries’ hands tied

“As a result, all export industries are effectively going bust. The biggest ferrochrome producer in the country, owned by Chinese investors, says it will have to suspend operations because a large part of its revenues are effectively confiscated by the Reserve Bank.”

Gold sales are down nearly 50% as a result of the Reserve Bank’s confiscation, so gold is now being marketed informally on the black market.

These dollars confiscated by the Reserve Bank are then allocated to the politically connected, who use them to arbitrage fuel, food and other commodities. Most Zimbabweans are forced to use so-called ‘real-time gross settlement’ (RTGS) dollars, which are worth less than a third of the value of US dollars.

Zimbabwe’s finance minister Mthuli Ncube is taking heat for the current economic crisis as inflation soars to 50%, raising fears of a return to the country’s hyper-inflationary past when consumer goods prices were doubling every few hours. That was a decade ago. The crisis was brought under control by introducing US dollars and South African rands as the accepted payment method. Almost instantly, inflation reduced to less than 3% a year.

Ncube’s economic reforms seemed sound enough. Public sector wages swallowed more than 90% of revenues, and the fiscal deficit was running at 40% of the budget. Something had to be done to fix this. In August last year he announced a roadmap of reforms, including lowering government expenditure and additional sources of revenues.

One of the new sources of revenue was a 2% tax of all money transfers. This is expected to generate US$2 billion on the roughly US$120 billion from electronic money transfers each year. Announcing these reforms in August 2018, Ncube also allocated hard currency accounts to all Zimbabweans, allowing them to receive payments in dollars, rands or other hard currencies.

It’s do or die time for one of SA’s oldest gold mines

Written by Ciaran Ryan. Posted in Uncategorized

This article first appeared in Moneyweb.

Every mining accident is a tragedy, but few compare to the horror of the collapse of a supporting pillar at Lily gold mine in Mpumalanga in 2016 which claimed the lives of three workers operating the lamp room in a shipping container on the surface.

The collapse of the pillar buried the container under 60 meters of rock and debris. The bodies of Solomon Nyirenda, Yvonne Mnisi and Pretty Nkambule remain buried there.

This tragedy brought an abrupt end to mining operations at Lily and its sister mine, Barbrook, one of the oldest gold mines in the country. The mines are owned by Vantage Goldfields, which has been in business rescue for three years. The nearby town of Louisville was devastated by the loss of nearly 1 000 jobs when the mines were shuttered.

Earlier this month a glimmer of hope returned to Louisville when Vantage Goldfields cleared a major hurdle in its path to recommence mining operations after Siyakhula Sonke Empowerment Corporation (SSC) and its subsidiary Flaming Silver were granted approval for the transfer of control of mining rights by the department of mineral resources (DMR).

Last week Flaming Silver announced that its offer to purchase Vantage Gold had become unconditional.

“This is a historical and transformational event in the history of the 52 year old Vantage Goldfields Group, whereby control of the company will for the first time change to black ownership,” said SSC in a statement.

But the deal is far from in the bag, according to business rescue practitioner Rob Devereux.

Straight-out street fight

There’s no doubt the Vantage business rescue has been a straight-out street fight. Nor is there doubt that the relationship between SSC head Fred Arendse and Devereux has been anything but smooth. This is not uncommon in business rescue, where creditors continually weigh the pros and cons of liquidating rather than saving the company.

Read: One of SA’s oldest gold mines fights for its life

The chief bone of contention in the Vantage case is how SSC will come up with the R50 million equity capital needed to trigger R190 million in loan funding from the Industrial Development Corporation (IDC) which would allow the rescue to proceed.

Arendse says Devereux failed to timeously disclose additional mineral assets capable of generating revenue of about R550 million over three years, and accused him of “capturing” Vantage, effectively delaying its return to operations for three years. “Creditors’ businesses would have been saved and a lot of people’s livelihoods would have been saved by them continuing to be employed on the mines,” said Arendse, adding that Vantage had been subjected to “attacks, sabotage and interferences.”

Devereux was recently joined by fellow business rescue practitioner, Daniel Terblanche, who appears more to Arendse’s liking.

Auction for Gupta mining assets hots up

Written by Ciaran Ryan. Posted in Journalism

This article first appeared in Moneyweb.

Project Halo is the preferred bidder but two late entrants have thrown their hats in the ring.

The auction for the Gupta mining assets, including Optimum and Koornfontein coal mines in Mpumalanga and a stake in the Richards Bay Coal Terminal, just got a whole lot more interesting.

Eight Gupta companies, including the mining assets, were placed in business rescue a year ago after commercial banks distanced themselves from the Guptas and cut off transactional banking facilities. The business rescue practitioners have been racing to wrap up the sale of the key mining assets so that the mines can return to full production and pay their workers – who stopped receiving salaries in October last year.

In December last year, a group called Project Halo was announced as the preferred bidder with an offer of R3.6 billion for the assets, which includes R600 million of post-commencement funding that will be used to return the rapidly deteriorating mines to operational efficiency.

The other two bidders are the state-owned Central Energy Fund (CEF), which manages SA’s oil and gas assets, and the Phakamisa consortium, headed up by mining stalwart, Bernard Swanepoel.

Business rescue practitioner Louis Klopper says the bids are competitive in terms of price, and differ primarily in their funding structure. “We are hopeful that by February this year the creditors will decide which deal is the most attractive and vote on it. We don’t want to delay the process, and so we have engaged frantically with the key stakeholders in securing meaningful feedback on bids so that the revised business plans can be published with haste. Our priority is to get the workers paid and back on the job.”

Optimum, in particular, has been the victim of looting and sabotage, with electricity cables and equipment stolen and destroyed. The underground Koornfontein mine is in better shape, and will likely be in production before Optimum.

Project Halo is 40% owned by four directors, Mbongiseni Duma, Paul Buckley, Julian Kidd and Nkanyiso Buthelezi. A further 20% is held by an A-rated financial institution, which provided initial funding, and 12% by an established mining house. The names of these shareholders have been withheld until the creditors have voted on the proposed acquisition. A further 8% of the shareholding has been allocated to each of the workers, a women’s consortium and the community.

Some criticism

There has been some criticism that creditors will be asked to consider a bid without being privy to the identity of all Project Halo shareholders. Questions are also likely to be asked about the source of the CEF funds, and whether National Treasury is guaranteeing or fronting funds for its bid.

Are you suffering from corruption fatigue yet?

Written by Ciaran Ryan. Posted in Uncategorized

This article first appeared in Accounting Weekly.

Suffering from corruption fatigue yet? You better get used to it, because it looks like the Zondo Commission of inquiry into state capture is just getting started.

This week the commission heard from Angelo Agrizzi (pictured), a former executive with Bosasa and, boy, did he name names.

Bosasa (now called African Global Group) paid R50,000 a month to Communications Minister Nomvula Mokonyane, as well as truck loads of whiskey and liquor. The good people at Bosasa also paid money for funerals for Mokonyane’s family members. Mokonyane, now environment minister, has called the bribery claims “preposterous”.

Agrizzi said no financial benefit was received by the company as a result of these bribes. When he raised this point with his boss Gavin Watson, he was told: “You are in Africa, do as in Africa.” The Watsons, for those too young to know, were treated as heroes in the apartheid years for refusing to play rugby in racially segregated teams. They clearly capitalised on their fame when the ANC got into power.

Who else is alleged to have received money?

R500,000 a month went to officials at the Department of Justice and Correctional Services. This increased to R750,000 a month when former SA Revenue Services (Sars) head Tom Moyane was head of correctional services. (Bosasa supplies food and other services to prisons).

Vincent Smith, ANC MP and co-chair of the constitutional review committee looking at the issue of land expropriation, was paid R100,000 a month.

The former CFO of the Department of Correctional Services, Patrick Gillingham, as also on the payroll.

Agrizzi testified that former President Jacob Zuma was paid R300,000; former SAA chair Dudu Myeni received a designer bag stuffed with money.

It was also claimed that former National Prosecuting Authority (NPA) bosses Nomgcobo Jiba and Lawrence Mrwebi were also apparently bribed.

Let’s bear in mind these are untested accusations at this point so the presumption of innocence must be respected. But what a list of names Agrizzi provided. This is starting to show how potentially rotten HMS South Africa has become.

Coal mining community shows the beautiful side of SA

Written by Ciaran Ryan. Posted in Journalism

This article first appeared in Groundup.

Shafted by the Guptas, the people of Blinkpan, Mpumalanga have transcended race and class barriers to help each other.

It was a dismal Christmas for thousands of coal miners in Mpumalanga when the formerly Gupta-owned coal mines of Optimum and Koornfontein, now under business rescue, stopped paying workers and contractors in October last year. It was the same story for workers at other nearby mines: Woestaleen, Boschmans, Klipbank, Setemba and Sandile.

In December a group of determined women, all of them employees of the nearby coal mines, decided to do something about it.

They set up a non-profit organisation called Feed the Miner and approached local businesses and farmers for donations. Six weeks later the organisation is providing food and grocery hampers to 650 families.

All of this is being run out of the Blinkpan home of Christo Mostert, a production foreman contractor at Koornfontein. Scores of miners and their families gather at his house twice a week to receive grocery hampers that should keep them going for a few days. Miners of every race join hands in prayer to give thanks for these modest blessings. They are surprisingly cheerful, given the miserable conditions they now find themselves in.

When the formerly Gupta-owned mines were placed under business rescue in February last year, staff never knew from one day to the next whether they would be paid. When the salaries stopped coming in October, so too did their pensions and medical aid. Many workers have had to borrow from family members to pay lights and water. There were no presents for the children at Christmas and no books or uniforms at the start of the 2019 school year.

There was jubilation in Blinkpan last week when a group called Project Halo was announced as the preferred buyer for the Optimum and Koornfontein mines, and the hope is that the R3.6 billion deal will be concluded within the next week or two.

“Project Halo was assessed as the best bid on the table, and of course we want to wrap things up as fast as possible so workers can get paid, but unfortunately there is a process that must be followed and certain legal steps must be taken first,” says Louis Klopper, business rescue practitioner for eight Gupta companies (including Optimum and Koornfontein) placed under administration when the major commercial banks distanced themselves from the Guptas.

In a statement issued this week, Project Halo said a priority is to “get the workers to keep their jobs, provide backpay and generally get their morale back again”.