South Africans are making waves in North American mining

Written by Ciaran Ryan. Posted in Journalism

SA’s loss is that part of the world’s gain. From Mineweb.

One of the largest nickel and copper exploration projects in the US is headed by two South Africans, and demand for electric cars (and thus nickel sulphides) is expected to explode in the next decade. Image: Shutterstock
One of the largest nickel and copper exploration projects in the US is headed by two South Africans, and demand for electric cars (and thus nickel sulphides) is expected to explode in the next decade. Image: Shutterstock

All around the world, the Covid-19 crisis has forced companies to rethink their supply chains, particularly their potentially fatal over-reliance on China.

This is particularly true of electric car makers in North America, who are on the hunt for local sources of key raw materials that have traditionally come from East Asia.

Read: Carmakers urged to invest in mines to avoid battery metal pinch

Things were already looking up for the Tamarack nickel-copper-cobalt exploration project in the state of Minnesota in the US, but the Covid-19 economic crisis has given it new impetus.

What makes this perhaps even more interesting from a South African point of view is that the project is managed by Toronto Stock Exchange-listed Talon Metals (TLO.TSX), which has deep South African attachments.

The South African connections

Chairman Warren Newfield and CEO Henri van Rooyen are both South African and president Sean Werger is married to a South African.

The Talon team (previously through private investor-operator company Tau Capital Corporation) has a long history in SA and Botswana (see below), but Talon’s sole focus these days is the Tamarack high-grade nickel, copper and cobalt project in Minnesota in the US, which is turning out results which has caused a number of electric car makers to approach the company for discussions about potential business relationships.

“The exploration we’ve done so far indicates the presence of high-grade nickel, copper and cobalt along a 1km stretch of an 18km intrusive complex, and everywhere we’ve poked holes we’ve come up with promising mineralisation,” says Werger. “The next phase of the project is to explore south and north of the already identified intercepts.”

The exploration programme just completed shows nickel grades of 7.1% and copper at 2.98%. Also present is cobalt.

This is where it gets interesting.

The electric car market is expected to explode in the next decade, and with it demand for nickel sulphides, which are used in battery manufacturing. The nickel content in batteries has gone from about 20% to 80% in a decade, and will likely increase from there. Manufacturers are racing to improve the storage capacity of batteries, and hence the distance vehicles can travel before recharging. To do that, they need nickel in the form of nickel sulphates (nickel in powder form), and lots of it.

Many companies are now emphasising the importance of domestic supply chains as a result of the disruptions caused by Covid-19. As for Tamarack, there is only one other comparable nickel mine in the US, the Eagle Mine in Michigan. That will likely be mined out in about 2025, leaving no other US domestic source of nickel other than Tamarack, which is expected to come on stream around the same time.

“There is no doubt that electric cars are the future, and a domestic supply chain would be hugely advantageous for carmakers in the United States.

“We believe Tamarack is crucial to the future of EV battery production outside of China,” says Werger.

“Nickel is traditionally used in the manufacture of stainless steel, and that demand is not going away, but we are looking at potentially using Tamarack nickel to supply the electric car market.”

There will be tug of war over available nickel between stainless steel and electric car producers, undergirded by talk of a looming shortage in the market.

That’s only marginally reflected in the international nickel price, which surged in 2019 when Indonesia placed a ban on exports.

The Covid-19 outbreak deepened the sell-off already in play towards the end of 2019, with global stainless steel production briefly grinding to virtually a halt.

The longer-term outlook is more cheerful.

In a US Senate Committee meeting on Energy and Natural Resources in 2019, MD at Benchmark Mineral Intelligence, Simon Moores, said demand for nickel could increase 19 times if under-construction lithium-ion production facilities come online as planned, according to Nickel Investing News.

The US is dependent for 69% of its nickel from primary and secondary imports, and will be scrambling for any domestic production it can lay its hands on post the Covid outbreak.

Nickel production and consumption – US

Source: US Geological Survey, Mineral Commodity Summaries, January 2020

That leaves Tamarack as virtually the only supplier of note in North America.

Nickel price

Source: ShareMagic

Tesla is far and away the market leader in electric cars, producing 103 000 units in the first quarter of 2020, which was 33% above the same quarter in 2019. Sales will likely take a serious hit in the second quarter of 2020, given that its main production plant has been shut for several weeks due to the coronavirus, but this has barely impacted the share price – down only marginally from its February peak of $901.

Elon Musk this week defied the “fascistic” lockdown by reopening Tesla’s California plant, and defied authorities to arrest him.

Read: Tesla shares rally nearly 60% over seven straight sessions

The Tamarack project was initiated in 2002 by Rio Tinto, with Talon Metals initially coming in as a minority 18.45% shareholder and junior partner. It didn’t quite fit Rio Tinto’s size criteria, so it handed the management of the project over to Talon, which completed the first phase of its exploration just before the Covid-19 lockdown in March.

Talon has an option to earn a 51% interest in Tamarack by March 2022, and a further 9% by 2026 to get to a total 60% interest in the project, based on the fulfilment of certain conditions, including the payment of cash and shares to Rio Tinto, and the completion of a feasibility study.

“With just 1km of a potential 18km intrusive complex explored, the real sizzle is likely to come as exploration kicks into high gear along the remainder of the complex,” says Etienne Dinel, head of geology at Talon.

It is more expensive to produce nickel from laterites (which have high iron and aluminium content) than from high-grade sulphides. New planned production in nickel is largely focused on the higher cost laterites, which is expected to drive up prices in the future. Tamarack projects a lower than industry average cost of production due to the widespread presence of nickel sulphides on the property.

History

Talon Metals’s core team goes back a long way in SA mining, having defined the Platexco platinum deposit in the Bushveld complex before selling in 2000 to Implats for about $200 million (R3.7 billion at today’s exchange rate). Many of the same team members were involved in platinum group metals company AfriOre, which was sold to Lonmin in 2007 for about $355 million (R6.5 billion).

The group was also involved in the exploration of the Mmamabula thermal coal project in Botswana, which was sold in 2012 to the Indian-owned Jindal Group for about $120 million (R2.2 billion). The project was originally conceived to supply power to SA, but has been dogged by logistics and power grid issues, and was sold last year to Maatla Energy for a reported $150 million (R2.77 billion).

In yet another southern African project, Talon Metals merged with Saber Energy in 2010 to develop a coal-bed methane project and shale gas deposits in Botswana, that today is Tlou Energy on the ASX.

Cash to go

Werger says the company has C$2 million in the bank, but will need cash top-ups going forward for the next phase of exploration.

The shares trade on the Canadian stock exchange at about 10c. Like all junior miners with no cash flow (until project exit), Talon appears to have a decent speculative following, with some encouraging longer-term prospects.

Court cases are piling up against government lockdown

Written by Ciaran Ryan. Posted in Journalism

These cases won’t go away, even if lockdown is lifted, as government is seen to have over-stepped its powers. From Moneyweb.

Image: Shutterstock
Several groups want the courts to place a limit on government powers to impose a lockdown

Nearly two months into the Covid-19 lockdown and the court cases against government are mounting.

The Democratic Alliance is the latest to drag the government to court, challenging the 8pm to 5am curfew, the restrictions on the times public transport may operate, the ‘exercise window’ between 6am and 9am and restrictions on e-commerce.

Civil society group DearSA claimed a key victory on Thursday when the government eased all restrictions on e-commerce, except for cigarettes and alcohol. This was after the group threatened urgent court action unless government responded by Thursday May 14, 2020 to its request for all forms of online trading to be permitted, and outdoor exercise to be allowed during daylight hours instead of three hours in the morning.

In a statement issued on Thursday, DearSA says this is a major victory for civil society, but that the economic health of the country is deepening as the lockdown prolongs. It added it’s illogical to assume that the restrictions on e-commerce could possible slow the spread of the virus.

“As the lockdown progresses, South Africans are understandably concerned at the impact it is having on their lives and on the economy, and we know this because of the surveys conducted on a regular basis by DearSA,” says Daniel Eloff of attorneys Hurter Spies, which is representing DearSA. “There is growing frustration at the needless harm that is being done to the economy and small businesses by the extension of the lockdown to e-commerce platforms.”

Human rights advocate Mark Oppenheimer, who is advising DearSA, says rather than challenge the entirety of the lockdown, the decision was made to tackle ‘low-hanging fruit’ such as the e-commerce ban. “I’m glad that so may people are joining the fight. I have a feeling that someone will challenge the lockdown on a broader front, but our decision to tackle just a part of it has borne fruit.”

Fair-trade Independent Tobacco Association (Fita) is also challenging the government on the ban on cigarette sales. It also declared a partial victory, after government agreed that the manufacture and sale of cigarettes has always been permitted under current lockdown regulations. However, factories are limited to 30% staffing.

Fita had asked the Joburg High Court for a “declarator” that the export of tobacco products and cigarettes is not prohibited, and that cigarette manufacturing can resume. Tobacco manufacturers had closed their factories in response to contradictory statements snd threats from ministers that now appear to have been without any basis in law.

What Fita also managed to tease out of government is that the National Coronavirus Command Council (NCCC) does not vote on matters and certainly no vote was taken on the ban on cigarette sales specifically.

The next phase of the fight is to get a record of decision from government, along with reasons, for deciding to ban cigarette sales. With this in hand, Fita is expected to challenge the lawfulness of the ban and seeks to have it overturned. The reasons for the ban given by government cite “health reasons” – rather than slowing the spread of virus – which Fita’s legal team has argued has no basis under the Disaster Management Act. If cigarette sales are banned for health reasons, the same rationale could be used to ban the sale of chocolates and fizzy drinks.

Earlier this month trade union Solidarity teamed up with AfriForum to approach the Constitutional Court on an urgent basis to appeal a high court judgment allowing the Department of Tourism to give preference to BEE businesses struggling to survive as a result of the Covid-19 crisis.

Solidarity’s chief executive Dirk Hermann said the awarding help based on race is bizarre. “It is scary that there could be Constitutional grounds in a crisis like this which allows the allocation of emergency funds to take place based on race.”

AfriForum chief executive Kallie Kriel says the organisation decided to approach the Constitutional Court directly, as the small tourism businesses owned by members of minority groups, just like all other small tourism businesses, are in urgent need of assistance. “If the case drags on, countless small white-owned businesses will go under and government will be complicit. Figuratively, it is economic murder of minorities,” according to an AfriForum statement.

The organisation says it wants legal clarity on whether discrimination against whites is permitted, even in times of crisis, and will approach the United Nations’ Committee on the Elimination of Racial Discrimination if its efforts do not bear fruit in the local courts.

Fita, too, says it plans to continue with its case even if the ban on cigarette sales is lifted. “There is a legal principle we need clarified,” says Fita chairperson, Sinenhlanhla Mnguni. “Even if the ban is lifted, we could once again find ourselves in Alert Level 5, and we cannot take that chance where our members’ businesses can be shut down by a minister, based on irrational decision-making or poor data.”

The DA papers before the Pretoria High Court points to the economic cost of the lockdown: between three and seven million jobs could be lost, depending on how long the lockdown lasts; one-third of the resources that were productive in February this year are now lying idle; and the average daily transactions through the payments system is down by half.

The Freedomfront Plus (FF+) party is also taking government to court on an urgent basis “to challenge the validity of the National Disaster Management Act and to request the court to find that the government is abusing the Act, which will mean that the announced state of disaster and the associated regulations are unconstitutional.”

The FF+ says it has become evident that the government is abusing its powers by invoking the National Disaster Management Act instead of the State of Emergency Act, which places limitations on the length of time allowed for a state of emergency, while requiring parliamentary approval and oversight on regulations. It wants the government to disclose the data on which the state of disaster is based and the reasons behind the timelines for the different levels of lockdown were determined.

The original reasons for the lockdown appear to have achieved their primary aims. Why then, does the lockdown still continue, the party wants to know.

This is likely just a taste of what’s to come in the next few weeks as the level of desperation resulting from the lockdown plumbs new depths, along with open defiance of the lockdown (which is already happening as many businesses reopen regardless of the consequences).

Lockdown is killing the labour movement

Written by Ciaran Ryan. Posted in Journalism

Some trade unions are likely to exit this lockdown crippled. From Moneyweb.

‘Sabotage’ … calls for lifting the lockdown grow more shrill by the day. Image: Moneyweb
‘Sabotage’ … calls for lifting the lockdown grow more shrill by the day. Image: Moneyweb

Nothing breaks the spirit of the labour movement like retrenchments, and there were enough of those over the last 12 months, even before the Covid-19 outbreak.

This is why union members pay their monthly dues. They expect their union leaders to guard their interests in good and especially bad times. Those leaders are now being tested as never before.

Last week the National Council of Trade Unions (Nactu) said the lockdown was “diabolical” and called for its immediate lifting to arrest the devastation caused to business and employment.

As jobs are lost, so too are union members.

A few months ago, some business leaders may have cheered a weaker labour movement but, oddly enough, on the lockdown they now appear to be of one mind. The calls for lifting the lockdown grow more shrill by the day.

Last month the South African Reserve Bank said the economy could lose 370 000 jobs,  and 1 600 companies, as a result of the lockdown. That’s a rather hopeful view. Business for South Africa says the economy could contract by 16% this year and see four million jobs lost. The only way to avoid this outcome is for a rapid easing of lockdown restrictions.

Read: Kingston calls for faster reopening of SA economy

The longer the lockdown, the more devastating it is for organised labour. “Workers are being furloughed, and many have been retrenched, and this means they are unable to pay their union dues,” says Nactu secretary-general Narius Moloto. “So, in addition to shutting down thousands of businesses, small and large, this lockdown represents the greatest threat to our freedoms since the birth of democracy in SA.

“In one fell swoop, the decades of struggle for workers’ rights have been nullified,” says Moloto.

“It now appears the government has massively overreacted to this virus.

“Like most South Africans, we were initially cautiously supportive of President [Cyril] Ramaphosa’s efforts to contain the spread of the virus, but the costs to the country are now becoming clearer.

“The lockdown now begins to take on the shape of sabotage, and there must be accountability for government ministers who have crashed the economy while still drawing their state salaries, paid for by taxpayers,” says Moloto.

Like many others bearing the brunt of this crisis, he is furious over the lockdown. He says government ministers are completely insulated by their cushy salaries from the travails of ordinary South Africans, many of whom have no food.

Read: Lockdown: Poking the bear?

If there’s one ray of hope in all this, it’s that trade union representatives have now been allowed to resume work – in other words, to represent workers.

But there is scant celebration in this: workers in many sectors have not been paid by their employers. A survey by the National Employers Association of SA (Neasa), representing roughly 10 000 small and medium-sized businesses, shows that only 47% of employers that had applied for Unemployment Insurance Fund (UIF) relief had received funds, and often only partial payments. This scheme was set up by government to ensure employers could pay their workers during lockdown.

Read: Employers ‘angry, frustrated, horrified’ by Ters process

Some trade unions will fare better than others. Those in the mining sector, 50% of whose members have been recalled to work, should be able to survive with some dignity. So too the National Education, Health and Allied Workers’ Union (Nehawu), and the trade unions servicing public sector workers.

Those likely to feel the pain include the Building Construction and Allied Workers Union, where it is estimated that up to 30% of jobs could be lost if there is a prolonged lockdown, and the National Union of Metalworkers of SA (Numsa) – also facing a potential barrage of retrenchments.

Most unions suffering … but silent

What Moloto finds particularly troubling is that while the lockdown is also killing the labour movement, most trade unions are silent on the long-term impacts, and are actually applauding the government’s “massive overkill”. While many unions have been critical of aspects of the lockdown, few have challenged the devastating impact to their membership over the long term.

In April the Association of Mineworkers and Construction Union (Amcu) brought a court case against the government to impose industry-wide safety standards to protect workers from the Covid-19 virus, but later withdrew this when lockdown exemptions granted to 129 mines were passed into law. It later supported the government’s plan to allow mines to ramp up to 50% production, provided workers’ safety was not imperilled.

On Friday, the National Union of Mineworkers berated those companies issuing Section 189 notices (in terms of the Labour Relations Act) to retrench workers. “Our position is that 50% of the workers that have not been recalled must be paid either by the companies or through the [UIF] relief fund, said the union in a statement.

Conflicting concerns for health worker union

Last week Nehawu, many of whose members are at the frontline in battling the virus, expressed concern over the number of healthcare workers infected by Covid-19. Health department figures show that 511 staff working in the sector had become infected and 26 were receiving treatment. But while a chorus of South Africans has called for an easing in lockdown regulations, Nehawu urged government not to relax restrictions on the sale of cigarettes and alcohol, so as not to overburden the health care sector.

According to research by the Southern Africa – Towards Inclusive Economic Development (SA-Tied) programme, the sectors most likely to suffer from a protracted lockdown are construction (about 30% job losses), and finance and manufacturing, which could see a 15% reduction in annual employment.

Source: SA-Tied

Moloto says the already-precarious status of construction workers due to weak investment in the sector may now suffer irreparable harm due to the lockdown. The only way out of this is for government to initiate a massive infrastructure programme to reclaim some of the jobs lost.

Read: Covid-19 impact on construction sector will be ‘catastrophic’

A Neasa survey among its members shows that only 18% currently support the lockdown, though the initial support was overwhelming.

“It is time for bold, honest and very strong leadership,” says CEO Gerhard Papenfus. “Those with ulterior motives need to be exposed.

“The political leadership may decide to continue to cultivate the current narrative, but that will result in an even more rapid erosion of trust.”

Automating the future of accounting

Written by Ciaran Ryan. Posted in Journalism

The combination of machine learning and cloud is freeing accountants from the shackles of number-crunching. From Brainstorm magazine.

Hennie Ferreira, Osidan (Karolina Komendera)
Hennie Ferreira, Osidan (Pic: Karolina Komendera)

Hennie Ferreira became an accountant almost by accident. He previously ran an online digital marketing company, leaving the accounting work to the so-called experts – until he realised the expert he had hired to run his books had made a royal mess of things.

Ferreira decided to learn the accounting game himself, and studied under the Chartered Institute of Management Accountants, before going on to specialise in tax.

His wife Melissa studied through the Association of Chartered Certified Accountants, and pretty soon their careers had taken an entirely new direction. Ferreira realised it would be wise to also learn coding so he could automate as much of the accounting grunt work as possible.

The couple co-founded Osidon with the aim of building the ‘world’s first online digital accounting firm’. Having seen the sloppy end of accounting for themselves, they realised that most companies and their accountants are battling to remain compliant amid an ever expanding forest of regulations.

Osidon started using AI and machine learning to automate routine bookkeeping functions and make sure clients remain on the right side of the law. This was pioneering stuff. “We didn’t quite realise what work was involved in automating accounting services when we started, so we were learning as we went. But what we achieved was a world first and we’re still improving.”

Having tested the concept in SA, Osidon is about to take its business concept to the US and UK. It’s currently signing up close to 20 new clients a week, most of them attracted by the low cost (less than R1 000 a month for the basic service) and dissatisfaction with their existing accounting provider.

Focused on the small business sector, Osidon makes it affordable for clients to get the kind of accounting and compliance services that normally cost several times what it charges. Says Ferreira: “We’ve built a custom system that automates 65% of practice accounting work and soon it will be 85%. It integrates with (cloud-based accounting platform) Xero, but our system does all the heavy lifting. This system manages our staff and also does a lot of the actual tasks that our accountants no longer have to do. This helps them focus more on consulting with clients.”

There are scores of software products on the market designed to electronically capture and smooth business workflows, but Osidon has picked what it deems to be the best of these and integrated them.

The complete package

Once a new client is on-boarded, the client’s legacy system is integrated and parked in the cloud, using Xero. All the compliance issues are automated, from tax and VAT submissions, to annual financial statement returns to the Companies and Intellectual Property Commission, labour and compensation return funds. Osidon does all the accounting, annual financial statements and payroll, with a legal hotline to keep clients on the right side of the law and provide advice. Monthly management reports and tax structuring complete the package, providing intellectual insights into areas of greatest efficiency and weakness in the business.

What used to take an accounting team weeks or months to accomplish is now being done in hours. “A huge amount of the accounting and compliance work being done in-house by companies is simply too slow, inefficient, and costly. Most of these tasks can be automated. We’ve added our proprietary AI to further automate workflows and transactions and give managers a much deeper understanding of what drives their business. We set out to build a network of prosperous clients, and it was always our intention to show them how they could perform better. This is where the real value lies, not just in being a record keeper for our clients.”

All this is completed offsite, saving clients multiple salaries that kept the accounting department buried under a tower of paper. Not your typical accounting outfit, Osidon operates a busy Facebook page with regular updates and interviews with inspirational business leaders going out via livestream to more than 100 000 people. The menu of services is being expanded to offer pension, investment and financial products to clients through partnerships with specialist providers.

This is the future of accounting, says Nicolaas van Wyk, CEO of the SA Institute of Business Accountants (SAIBA), which has more than 8 000 members, most of them accountants in business or practice. “Osidon is a great example of the model we encourage our members to emulate. I think the accounting profession has generally been weak in staying abreast of technological changes. It’s now becoming clear that the accountant is an endangered species. Many of the functions performed by accountants today will be done by machines in three to five years’ time.”

In recognition of the changing role of accountants, SAIBA has set itself apart from other professional bodies by fostering an entrepreneurial culture among its members.

It recently launched a number of specialist licences, creating new business opportunities for accountants in practice. Van Wyk says his goal is to make millionaires of all his members.

For example, some SAIBA members have become immigration specialists, others are acquiring licences to become business rescue practitioners, while still others are specialising in providing accounting officer services to schools, farms and churches. The accountant of the future will look more like a stock analyst than a nerdy accountant and had better know something about data analysis and coding.

The future

Adriaan Basson is a chartered accountant who abandoned his cushy job with one of the ‘big four’ accounting firms to set up a small accounting practice, armed with a grandiose vision of where the accounting profession was headed. Rather than spectate from the sidelines, he decided to give it a guiding hand.

He set up Wingman Accounting five years ago and, like Ferreira, saw the importance of automating basic accounting functions. “We’re more a tech company than an accounting provider,” he says. While most accountants sell hours, Wingman sells subscription packages, which allow it to scale up without incurring massive overheads. In fact, many of his staff don’t even have an accounting background.

They don’t need to. What they need is a sound understanding of Wingman’s systems and data analysis.

Wingman’s basic package starts at R3 500 a month, rising to R12 000 a month for more sophisticated services. The basic package includes soft ware fees for Xero, Receipt Bank, which automates the capturing and posting of expenses to the relevant ledgers, and SimplePay, an online payroll soft ware package.

The real sizzle comes in the management reporting and strategic analysis that Wingman is able to provide. Basson wants his clients to prosper; failing clients don’t make good referrals. He isn’t shy to fire clients that don’t share his vision of automated accounting, backed by deep dive analysis of operational and financial progress. Most clients want face-to-face time with their accounting provider, so the idea of a fully digital accounting service may be some way off.

“I doubt you’ll ever completely eliminate the human element in accounting. Your clients want your input and advice, but they don’t want the headache of having to pull together the monthly accounts and ensure that all the compliance boxes have been ticked.” New clients come mainly by word of mouth, which is the best and cheapest marketing you can get, says Basson. “We set out to offer something that wasn’t available to small and medium-sized businesses.”

For small businesses, the big technological leap in accounting software involves moving to the cloud. Packages like Intuit QuickBooks and Xero have invested heavily in building systems that offer some of the functionality of much costlier enterprise resource planning platforms such as SAP, which track real-time workflows across gigantic operations. Oracle owned NetSuite is pitched at the medium-sized enterprise market and has captured more than 40% of the financial management system market.

E-commerce and integration with customers and suppliers – all available on a single dashboard – was once an expensive luxury available only to deep-pocketed corporations. That’s now changing as technology costs and soft ware functionality reach into the lower end of the market.

If accounting is the science of good order and traditional accounting functions are being taken over by machines, the accountant of the future must become a master at interpreting machine data. As SAIBA’s Van Wyk points out, their survival as a profession depends on the speed with which they embrace this new world, and migrate from being pure record-keepers to elite advisors.

Money never sleeps; neither do bots

Written by Ciaran Ryan. Posted in Journalism

As machines take over the world of investing, data analysts and coders are fast becoming the new rulers. From Brainstorm magazine.

'HTF accounts for a growing percentage of total JSE trade, perhaps 35% to 40% of the total.'
‘HTF accounts for a growing percentage of total JSE trade, perhaps 35% to 40% of the total.’

Michael Lewis is best known as the quirky fund manager depicted playing drums in his office in the movie The Big Short. He predicted – a little too early – that the US housing market was headed down the drain, and managed to make a fortune betting against the banks. It became clear to Lewis and others that the banks were recklessly doling out mortgage loans, often to people without jobs, and then bundling these loans together and off-loading this junk as AAA-grade mortgage-backed bonds to big institutional investors. It was one of the great scandals of the early 21st century.

Lewis’ next opus was a book called Flash Boys, which explores the relatively modern phenomenon of high-frequency trading (HFT). HFT, as defined by Investopedia, is ‘a method of trading that uses powerful computer programs to transact a large number of orders in fractions of a second. It uses complex algorithms to analyse multiple markets and execute orders based on market conditions’.

Lewis describes how a US company called Spread Networks invested $300 million building a 1 330km cable from Chicago to New York with the aim of reducing data transmission latencies from 17 to 13 milliseconds. That was in 2010, and marked a huge improvement in transmission speeds available at the time. In 2011, Hibernian Atlantic announced that it was building a transatlantic cable between London and New York to shave five milliseconds off transmission speeds.

There is a limit to how fast these speeds can get, and that limitation is the speed of light. The only way to increase speeds is to shorten the cable, which is exactly why HFT firms started taking up office space just metres away from the stock exchange computers. Being so close to the action means they can execute trades almost at the speed of light.

Those closest to the stock exchange engines are first to receive data, process it through their algorithms, and then execute trades. It’s reckoned that HFTs account for up to two-thirds of all stocks traded in the US, and perhaps a third on the JSE.

Closer to home


“It’s going to be much more difficult going forward for high-frequency traders to make the kind of money they made in the past, so intelligent algorithms are going to have to find new ways to identify profit-making opportunities.”

Fanie Harmse, FX & Project Management


In 2013, the JSE launched its colocation services, which allows traders to position themselves within shouting distance of the market infrastructure. It boasts a round-trip co-location latency of less than 100 microseconds (0.1 milliseconds) and, to all intents and purposes, bypasses the telco providers. To level the playing field, all cables to the market engine are of equal length, and time synchronisation ensures everyone receives the same information at the same time.

The JSE won’t divulge any stats around HFT – in fact, the algorithms behind HFT are as close to top-secret as you’ll find in the financial markets. Those in the business aren’t saying much, but we can get a sense of where this is going from the JSE’s colocation stats (not all of these trades would be HFTs).

The ‘flash crash’ of 2010, which was the second worst intra-day drop in stock exchange history – a trillion-dollar crash affecting multiple stock markets and lasting 36 minutes – was partly blamed on high-frequency traders. That said, regulators agree other factors were also at play, such as a mistakenly large sell order for US consumer goods company Procter & Gamble.

In 2015, the US Department of Justice laid 22 charges of fraud and market manipulation against trader Navinder Singh Sarao. As the case played out, we were introduced to high-frequency trading terms, like spoofing, layering and front-running.

Layering is where a high-frequency trader places multiple bogus orders, which are quickly cancelled to fool the market into believing a big price move is underway. Spoofing is a similar (and equally illegal) tactic where the trader places hundreds or thousands of orders for an asset to trick other traders into jumping on the bandwagon to drive prices either up or down. The spoofer has no intention of executing on these fake trades.

Front-running is where a trader has advance knowledge of information that might move an asset price. Front-running can occur when a broker receives a large order to acquire stocks on behalf of an institutional buyer. The order is large enough to move the market price, so the broker can front-run it by placing an order of his own before executing the large institutional order, knowing he can make a quick profit from the subsequent movement in price. Front-running, a close cousin to insider trading, is illegal in most markets. HFTs have been accused of all these transgressions, and more.

Research by Markus Baldauf and Joshua Mollner at the Kellogg School of Management at Northwestern University points out that only big hedge funds or investment banks can afford the heavy technological cost of entering this market. They conclude that HFTs have reduced the ‘spread’ costs of trading (the difference between the price of buying and selling an asset) and are therefore a benefit to the broader market. On the downside, HFTs were found to amplify market moves already in play, and that can distort markets. Their recommended solution is to introduce slight delays in the release of market data to avoid this kind of market arbitrage, or profiteering by jumping onto a stock slightly ahead of the pack with a view to making a profit at the expense of the laggards.


“HTF accounts for a growing percentage of total JSE trade, perhaps 35% to 40% of the total.”

Tshepo Maseko, Legae Peresec


Rules? What rules?

There have been attempts to regulate HFT in Europe and the US, but new rules have done little to curtail the tsunami of trade from these machine-generated trades.

Tshepo Maseko, head of trading technology at financial securities firm Legae Peresec, says high-frequency trading in SA isn’t yet as sophisticated as in the US, but it’s getting there. “HTF accounts for a growing percentage of total JSE trade, perhaps 35% to 40% of the total. Most of the HFTs are in the most liquid top 40 stocks. Market participants use a variety of different algorithms to profit under certain market conditions, although a lot of the strategies are linked to the news cycle, since this is the main driver of price changes.”

There are thousands of algorithmic strategies. For example, an algorithm might trigger a buy on tech stocks when they drop to a predetermined price level, knowing this is where other traders generally buy.

Fanie Harmse, operations director for Swiss-based FX & Project Management, a crypto and financial trading tools company, says HFT has made intra-day trading less consistent than was the case in the past. He refutes the suggestion that HFTs have much influence over long-range market trends.

“High frequency algorithms can’t influence prices in a sustained matter. Their goal is to get in and out as quickly as possible, making a tiny gain on each trade. They benefit through extremely fast execution that normal traders don’t have access to. In the longer term, price movement is largely controlled by big international banks, governments, corporations and hedge funds. These big players aren’t interested in intraday noise, even though they will often have systems to benefit from it through market-making. For political, economic and other reasons, they’re more interested in longer-term trends.”

Muddying the waters

Harmse says the widespread use of algorithms and artificial intelligence has reduced any competitive advantage, making it harder to profit from market moves that happen in milliseconds. That’s a view born out by international research – HFT profits have dwindled over the last decade. FX & Project Management has developed an algorithm called Access that picks up only major market moves, which occur roughly 20% of the time. “The reason most systems fail is that they’re over-active in the market, and we know that the market is essentially moving sideways 80% of the time. It’s difficult to consistently make money in a sideways market. Our systems are designed to identify trends and ride these until the trend is over. I think it’s going to be much more difficult going forward for high-frequency traders to make the kind of money they made in the past, so intelligent algorithms are going to have to find new ways to identify profit-making opportunities.”

High-frequency traders have rejected claims that they’re a threat to financial markets, or that we’re sitting on a financial Hiroshima waiting for another trigger, as happened in the ‘flash crash’ of 2010.

Most of the HFTs are privately-owned companies and therefore don’t share their secrets, but by their own words they are a force for good. They provide liquidity when needed. Many of these HFTs are market makers, meaning they will both buy and sell assets, as and when needed. They make money on the ‘spread’, or the difference between the buy and sell price.

David Scholtz is a full-time private trader. He says: “HFT is definitely a growing phenomenon all around the world, but I don’t see it as necessarily evil, as is often claimed.”

Much of the volume generated from HFT shops is benign – providing liquidity when needed, or for portfolio rebalancing. For example, if there’s demand for Anglo American shares and very few people are selling, market makers will step in with stock on hand to sell. For that, they will want to collect a fee. Without this liquidity, the shortage of stock could drive stock prices higher than would otherwise be the case. In this sense, HFTs smooth the bumps in the road and have made it easier to acquire stock. High-frequency traders say the reason the ‘flash crash’ corrected so quickly was because algorithms picked up the market anomaly and reversed it.

The more egregious aspects of high frequency trading, such as spoofing and front running, have been banned, though will never be completely eliminated.

One thing is for sure: the machines are taking over the world of investment, and that’s not going to change.

While no one was looking, a miner pulled off a major gold find

Written by Ciaran Ryan. Posted in Journalism

In Namibia – with Namibian and South African managers, Australian technology and Canadian money. From Mineweb.

Osino’s open-minded approach has yielded fruit where large mining houses previously working this area were oblivious to the riches beneath their feet. Image: Baz Ratner, Reuters
Osino’s open-minded approach has yielded fruit where large mining houses previously working this area were oblivious to the riches beneath their feet. Image: Baz Ratner, Reuters

One has to ask: where have the South African mining investors gone?

Right under our noses, Osino Resources – managed primarily out of South Africa and listed in Canada – has pulled off a potentially stunning gold find in Namibia.

Osino raised $15 million (R276 million) from Canadian investors in January, sufficient to complete its exploration programme within the next 18 months. The exploration company is targeting an initial resource of 1-2 million ounces with potential upside for much more, and indications so far are that this is now within reach.

Gold mines of this size are few and far between, which has thrust Osino onto the radars of North American mining investors – but none from SA.

The gold majors have had a spectacular run over the last two years, with companies like AngloGold Ashanti quadrupling in price. Now the attention is shifting to junior companies with quality assets.

Osino is a junior mining company founded by CEO Heye Daun, a South African resident who grew up in Namibia and served time at AngloGold Ashanti, Rio Tinto and Gold Fields, before striking off on his own (interestingly, he is also the nephew of Steinhoff founder Claas Daun).

’10 times’ potential

With gold prices nudging towards $1 800 per ounce, and the Bank of America forecasting a price of $3 000/oz within 18 months, Osino is being touted by some analysts as a potential 10-bagger (stocks that appreciate ten times their initial purchase price). The share currently trades at 86c, having shot up fourfold over the last 15 months.

The reason for the excitement: the exploration results coming out of the group at its Twin Hills area in Namibia, about 25km from the producing Navachab Gold Mine sold by AngloGold Ashanti in 2014 to QKR. Osino has exclusive rights over an area of nearly 7 000 square kilometres on the Karibib Fault Line, about 200km north-west of Windhoek.

Five of the seven holes drilled at Twin Peaks have yielded promising mineralisations, indicating a strike length of 11km. This will likely expand as exploration continues.

A unique aspect of the exploration is that drilling is being carried out through the hard calcrete cover which is common in this part of Namibia.

The samples are sent to Australia for assaying, where a relatively new ultra-low grade detection technology has illuminated what appears to be one of the biggest gold discoveries on the sub-continent in a decade.

The grades so far vary between 0.65 grams a ton (g/t) to 2.2g/t, but have been found to occur over a massive area.

This is a shallow deposit, allowing for low-cost open pit mining, and hopefully a relatively inexpensive gravity separation processing method.

Read: World’s deepest gold mines on a ‘cliff’ as virus curbs output

This is Daun’s second foray into Namibian gold exploration, the first being the advancement and definition of the Otjikoto resource which was sold in 2011 to another Canadian mining group, B2Gold, for nearly $200 million (R3.6 billion). B2Gold invested nearly $300 million (R5.5 billion) to develop the mine, which last year produced 178 000 ounces, roughly 20% of the group’s total gold haul for 2019.

Sweet spot

The sweet spot for any new gold mine is a resource of at least one million ounces. With gold prices now on the rise, investors are scrambling for good assets. This puts Osino in the pound seats. There are hundreds of junior mining companies, many of them operating out of Canada, but it is also a field strewn with dodgy characters. As Mark Twain remarked: “A gold mine is a hole in the ground with a liar standing on the top of it.”

“The only way to survive as a junior mining company is build a solid track record and we have that,” says Daun. “Our investors are highly respected and our geological team, led by Jon Andrew and Dave Underwood, is among the best in the business. This explains why we have managed to close four separate rounds of funding, the latest being $15 million, which we secured in January.”

Osino was the first to explicitly apply the so-called orogenic approach to gold exploration in Namibia. This implies a geological approach based largely on structural geology and a new understanding of how fault lines occur and how this can point to the location of mineral deposits. Historical gold exploration in Namibia tended to be model-driven and somewhat dogmatic and Osino’s open-minded, first-principles based exploration approach has now yielded fruit where large mining houses previously working this area were oblivious to the riches beneath their feet.

The Damara sedimentary belt on which Twin Hills is located is part of the Pan-African belt which extends through East Africa to Sudan and Egypt, and has been known for more than 100 years as a heavily mineralised belt containing copper, uranium, gold and other minerals.

It wasn’t exactly a hunch (or near-ology, as it is often referred to in the industry) that got Daun and his team to start looking in the area – but almost.

The fact that Twin Hills is located about 25km from the functioning Navachab mine meant it was a reasonable bet that gold was likely much more widespread. Taking into account that orogenic gold systems usually occur in clusters and not just in isolation, Underwood, Osino’s head of exploration, directed the company to start looking along the large, regional structural trends connecting Otjikoto and Navachab, which bookend Osino’s licence holding. He assumed that gold could also occur in sequences that had previously been overlooked and Osino thus started a large regional soil and calcrete sampling programme.

In these desert conditions, millions of years of surface evaporation of ground water pulls tiny particles of gold to the surface, giving an indication of what’s lying beneath – which is exactly what was found.

Unlike the thin hard rock veins found in the Free State and Witwatersrand, the gold in Twin Hills is disseminated in tiny fragments over a very large area.

In 2018, Osino’s soil sampling indicated that it had hit the motherlode and Daun went to Canada in search of funding to allow for the start of a drilling programme. “We got the funding we needed and then started drilling holes every 25 metres, going down to depths of five to 20 metres,” says Daun. “It was at this point we realised the extent of the mineralisation.”

Indicators

Although no formal resource modelling has been done yet, the footprint and grades of the discovery so far indicate the potential for a 1-2 million ounce deposit with significant further upside. Daun is confident further exploration will see this increase. Osino plans to rapidly advance the project to feasibility stage and then to seek an operating partner or even on-sell to a mining major, as Osino’s founders did previously.

Based on a rule of thumb calculation of $100 million for one million ounces, the deposit could fetch $200 million to $300 million (up to around R5.5 billion).

As was the case with the other two Namibian gold projects, further exploration and infill drilling should also lead to an increase in grades by discovering further high grade zones and extending the ones already identified.

Namibian upside

Operating in Namibia has two major benefits: it is cheap to mine due to likely easy metallurgy and the weak exchange rate allows for cheap operating costs.

US dollars go a lot further in Namibia when converted to local currency than they would in most other countries.

Osino trades on the Canadian Stock Exchange at 87c a share. It is difficult to value junior mining companies with no cash flow, so a useful rule of thumb is to assess what other investors are paying. The initial investors bought their shares at 20c in 2016, followed by another round at 38c in 2017. The latest round in January 2020 for $15 million was concluded at 78c a share, only slightly better than the current share price of 85c.

Read: Inflow into gold ETFs accelerates

To access the shares you would have to open an account with a local broker that gives you access to the Canadian stock market.

Tobacco association brings urgent application to lift cigarette ban

Written by Ciaran Ryan. Posted in Journalism

State power has been expanded, but does the degree to which it’s being exercised violate government’s constitutional obligation to behave with legality? From Moneyweb.

The applicants question how the ban helps stop the spread of Covid-19. If health is the concern, why not ban fizzy drinks and chocolates too? Image: Moneyweb
The applicants question how the ban helps stop the spread of Covid-19. If health is the concern, why not ban fizzy drinks and chocolates too? Image: Moneyweb

In the first of what looks like a slew of cases challenging aspects of the Covid-19 lockdown in South Africa, the Fair-Trade Independent Tobacco Association (Fita) is hauling government to court on an urgent basis to have the ban on the sale of cigarettes lifted.

Papers were served on Monday to President Cyril Ramaphosa and Minister of Cooperative Governance and Traditional Affairs Nkosazana Dlamini-Zuma.

Normally fratricidal tobacco manufacturers have parked their differences to take on government over what is a business-threatening shutdown. British American Tobacco (BAT) last week sent a letter to Dlamini-Zuma demanding that she lift the ban, failing which it would bring an urgent application before the court.

Read:
Batsa questions indefinite tobacco ban3 hot potatoes for government as legal battles begin

Fita, of which BAT is not a member, beat it to the punch. It wants the court to lift the ban, and for government to account to all South Africans on how it came to the decision to impose the ban in the first place.

It’s also asking the court for a “declarator” that the export of tobacco products and cigarettes isn’t prohibited, and that cigarette manufacturing can resume.

Fita says the previous Level 5 lockdown did not specifically ban cigarette sales, but that manufacturers and retailers had buckled under threats and contradictory statements from various ministers and law enforcement officials, and had stopped either manufacturing or selling tobacco products.

Ramaphosa announced the lifting of the cigarette ban in April, but this was countermanded by Dlamini-Zuma a week later.

Read: Government allows (a little) more e-commerce

Fita says the ban “directly affects the freedoms previously enjoyed under law by approximately 11 million cigarette smokers and tobacco users in South Africa,” as well as their physical and mental wellbeing.

Tax Justice South Africa estimates that the fiscus has lost about R1.5 billion due to the ban, while fostering a rampant illicit trade in cigarettes.

Cigarettes are reported to be pouring across the borders with relative ease from Zimbabwe and Mozambique.

In a letter attached to the Fita application, Gold Leaf Tobacco CEO Ebrahim Adamjee points out that the company paid R437 million in excise and R60 million in value-added tax (Vat) over April and May 2019.

Two-month loss to SA of R519m from one manufacturer

Because the company has been shut down, the fiscus will lose out on R457 million in excise and R62 million in Vat for the same months in 2020.

Read: Sars should be reminded of its constitutional duty

The company says it is making an operating loss of R801 000 a day, while fumigation and maintenance costs are spiralling due to the lockdown. The company employs 354 workers, not counting its supplier and distribution networks.

“The current status quo will likely result in Gold Leaf Tobacco having to enter a process of liquidation and/or business rescue, placing further strain on these individuals and their families as well as government,” says Adamjee.

State ‘deaf to the voices’ of citizens

Fita chair Sinenhlanhla Mnguni says the ban is irrational and that government has been deaf to the voices of those opposed to it.

A petition to lift the ban had garnered more than 496 000 signatures by late Monday.

In addition, says Fita, there is no evidence that the ban stops the spread of Covid-19. “There has been a clear failure to balance the interests of citizens who are legally entitled to purchase cigarettes and tobacco products with measures that may responsibly and legitimately be taken to combat the pandemic,” says Mnguni in his affidavit.

The Fita case will hopefully shed some light on the limits of state power in emergencies such as Covid-19.

Mnguni says the regulations imposing the cigarette ban are unlawful and invalid, and violate the constitutional obligations on government to behave with legality.

Lift ban – or explain your process

If cigarette sales are not allowed, Fita wants the government to explain how it came to determine its list of “essential goods” that could be sold during the lockdown.

None of the ministers making pronouncements about the ban have demonstrated how it prevents the spread of the virus. Public comments have been limited to smoking as a health hazard, in which government could have used the same rationale to ban fizzy drinks and chocolates.

Consumers’ rights to body and psychological integrity have been infringed, says Fita, including their “right to security in and control over their own bodies”.

Dlamini-Zuma’s imposition of a ban on cigarettes was motivated by “health reasons”.

“’Health reasons’ is not in law a basis for prohibiting the sale of tobacco and cigarettes under the regulations,” says Mnguni’s affidavit. “The [Disaster Management] Act and regulations have a very specific ambit – not delineated by ‘health reasons’.”

Has the gold stallion bolted?

Written by Ciaran Ryan. Posted in Journalism

Not by a long shot. Even Bank of America puts it at $3 000 an ounce in 18 months. From Moneyweb.

There are various ways to back the metal. Image: Andrey Rudakov, Bloomberg
There are various ways to back the metal. Image: Andrey Rudakov, Bloomberg

You may have noticed some astonishing sprints in gold stocks in the last month. DRDGold is up 70% since the start of the year. Gold Fields and AngloGold Ashanti are up nearly 50%, and Harmony is up a third.

All this while financial and industrial shares are looking increasingly priced for disaster. People are panicked and rushing for the safety of gold – and with good reason.

Read: Look who’s winning during lockdown

The gold share rally happened in the teeth of the Covid-19 lockdown, when production was shut down. The latest price spurt coincided with the announcement that deep level mines will be able to operate at 50% capacity. It will take four to six weeks for shuttered mines to get to this level of production, a feat complicated by the intricacies of maintaining social distancing and sanitary conditions underground.

Read: 60% of recalled miners have returned to work

Last week Bank of America raised its projections for gold to $3 000 (R55 600) per ounce within 18 months, which is 50% above the previous high of $1 921 (R35 600) set in 2012. The bullish outlook for gold is based on central banks’ commitment to virtually endless monetary expansion to prop up economies brought to their knees by the Covid-19 pandemic.

Alasdair Macleod of Goldmoney takes a more adventurous view, arguing in a recent article that fiat currencies are headed for the dumpster, which leaves just gold and silver (and possibly bitcoin) as the only remnants of sound money left standing. He says infinite money printing by central banks to rescue their economies from the current collapse will accelerate the demise of fiat.“History, economic theory and even common sense tell us governments and their central banks will rapidly destroy their currencies.”

Even the US dollar will struggle to retain its status as global reserve currency as foreigners start to ditch US dollar-denominated investments.

To understand why local gold stocks performed so spectacularly while production was shut down, you have to look at the rand price of gold.

The weak rand is the key culprit here, but as local mining costs are primarily priced in the local currency, and with fuel prices dropping, this provides an extra kick to local stock prices as mines recommence operations.

Rand price of gold

Source: ShareMagic

SA used to be the gold capital of the world, but the number of pure gold plays can now be counted on one hand. To get a broader exposure to gold stocks you have to look abroad at companies like Newmont, Barrick Gold, Kinross and Franco-Nevada, all of which are expected to deliver strong earnings growth in 2020.

Investment research house Zacks rates all of these as buys, despite strong recent gains, based on earnings growth forecasts for 2020 of 51% for Barrick Gold, 41.2% for Kinross and 15.9% for Franco-Nevada. These are considered by Zacks as the stocks most likely to double in 2020.

One way you can accumulate some of these shares is by opening an account with Mexem, a SA-based low-cost brokerage which allows you to trade stocks in more than 120 markets around the world.

AngloGold Ashanti

Source: ShareMagic

How to invest in gold

There are three primary ways to invest in gold:

  1. Buy the physical metal
  2. Buy shares
  3. Buy exchange-traded funds (ETFs) such as Investec Gold and Standard Bank Linker.

You can own physical gold in the form of Krugerrands or minted bars of various sizes, but this poses the challenge of safely storing it. However SA Bullion offers secret vaulting facilities both in SA and abroad.

The advantage of buying Krugerrands (stick with the ‘bullion’ coins, not the ‘proof’ ones) is they are considered legal tender and so do not attract Vat.

Hilton Davies, founder of SA Bullion, says demand for physical gold is reaching almost unprecedented levels due to fears of economic collapse and the devaluation of paper currencies: “The rand has devalued against the US dollar by 7% a year for the last two decades, and many people understand that owning physical gold is one of the best ways to hedge against this.

“We source our gold from Rand Refinery and, more recently, from overseas suppliers which we’ve had to do to keep up with demand.”

While Krugerrands of various sizes make up much of the demand, buyers are also looking for minted bars to be vaulted in secure (and secret) locations both locally and abroad.

Owning gold shares in SA comes with its own risks. Peter Major, director of mining at Mergence Corporate Solutions, says he thinks gold has run up a little too high and will likely fall a bit , with the rand likely to strengthen somewhat.

“Hence, I am shorting SA gold shares at the moment and am marginally in the money,” he says.

Davies says owning physical gold has advantages over shares, even though it pays no dividend or interest.

“I’m worried about SA gold mines. They are businesses and their margins can vary wildly. Our gold mines in SA are deep level with very high labour and operating costs, and of course now they are allowed to operate only at reduced capacity. The higher rand price of gold has certainly helped them over the last few months, but they remain quite speculative. Owning physical gold may be less exciting, but I would say the prospects for good returns over the next few years are excellent.”

Read: Inflow into gold ETFs accelerates

As a final note, it is worth pondering the latest move up in bitcoin, which touched $9 000 (R166 337) this week. The run-up in price was attributed to central bank money printing programmes, and a process known as ‘halving’ – a technical event where fewer new coins are released onto the market, thereby constricting supply.

60% of recalled miners have returned to work

Written by Ciaran Ryan. Posted in Journalism

But mining in the era of social distancing poses unique challenges. From Moneyweb.

One group says its workers are now considered employees 24 hours a day because what they do at any time affects what happens in the workplace. Image: Supplied
One group says its workers are now considered employees 24 hours a day because what they do at any time affects what happens in the workplace. Image: Supplied

Some 60% of recalled miners have returned to work in preparation for the lifting of the Covid-19 lockdown. The mining sector is among the first to be partially reopened after the government-imposed lockdown began in March.

Read: Mining sector breathes a little more easily

Coal mines supplying Eskom were allowed to continue operating during the lockdown, but the new regulations allow coal and open cast mines to operate at 100% production capacity, and underground mines at 50%.

At a press briefing on Tuesday, the Minerals Council SA and several mining groups outlined the steps being taken to ensure the health of workers in the post-lockdown workplace:

  • Thermal scanners at access control points to detect unusually high body temperatures;
  • Quarantine facilities for the sick;
  • Social distancing;
  • Masks and protective gear for miners gathering in close quarters; and
  • Most mines have deployed cellphone tracking apps to see where miners have been and who they had contact with.

This is the new world of mining until further notice.

Read: Mines forced to overhaul their supply chains

So far, just nine miners have tested positive for the virus, and most of these had contact with people who had arrived from abroad or had themselves travelled across provincial borders.

Industry-specific challenges

Getting workers back to the mines has had its own unique challenges: taxi associations are reported to have been stopping buses transporting miners and impounding vehicles, complaining that mines were interfering in their transport business.

Miners were sent essential services permits via their cellphones, which in some instances were not accepted by police who wanted to see hard copies. That appears to have been resolved after intervention by the Minerals Council.

A further complicating factor is a court challenge being brought by the Association of Mineworkers and Construction Union (Amcu).

Amcu wants Covid-19 declared a health hazard in terms of the Mine Health and Safety Act.

It also wants the industry response standardised in terms of regulations rather than left to each mine to come up with its own plans.

The Minerals Council says this is a legally incorrect application of the act’s health provisions, although it is not opposed to all of Amcu’s claims. The case is due to be heard this week.

Read: World’s deepest mines to take weeks to open after lockdown

Tebello Chabana, public affairs spokesperson at the Minerals Council, says early estimates indicate that the industry is currently operating at about 30% capacity, and that it could take more than a month for underground mines to reach 50% capacity.

10-point plan

Addressing concerns over the preparedness of the industry for a partial return to work, the Minerals Council said it has developed a 10-point action plan covering:

  • Employee education
  • Health worker readiness
  • Use of masks, sanitisers and temperature monitors
  • Proactive influenza vaccinations
  • Dealing with immunocompromised employees
  • Management of suspected cases or contacts of cases
  • Isolation of employees where required
  • Travel advice
  • Industry reporting, and
  • Communication and monitoring.

At the press briefing on Tuesday, mining groups outlined steps being taken to tackle the virus in a coordinated manner with government health authorities, municipalities and local communities.

Gold Fields is issuing workers with a ‘Coronavirus passport’ for travelling to and from work, and to remind them of the do’s and don’ts of Covid-19 social behaviour. Sven Lunsche, vice-president for corporate affairs at Gold Fields, says the new normal means workers are considered employees 24 hours a day, because what they do outside of work hours can impact what happens in the workplace.

AngloGold Ashanti vice-president of health Dr Bafedile Chauke says the group has strengthened the health care systems in countries where it operates, and has launched mass Covid-19 educational campaigns both nationally and in surrounding communities. In SA, it has made two hospitals available to government in North West province and Gauteng as isolation and treatment facilities, and – together with Sasol and Imperial – is supplying 1 000 litre bulk sanitisers to four major hospitals in Gauteng.

Anglo American spokesperson Nomonde Ndwalaza says the group’s Covid-19 campaigns are focused on critical areas such as water, energy, food supply and making sure banking and cash is available to those in need. It is providing support to 160 clinics, and ensuring that water tankers are getting to municipalities and villages in areas where it operates. The group donated $2 million support to the Solidarity Fund, aimed at supporting small businesses, and is distributing 66 000 food parcels in communities in SA, Namibia and Zimbabwe.

Sibanye-Stillwater head of investor relations James Wellsted says executives have taken a 30% cut in salaries, with more than R20 million being donated to the Solidarity Fund and the SA Future Trust Fund. The group paid out R1.5 billion in wages during lockdown, and is now gearing up for the return to 50% production capacity.

Exxaro head of stakeholder affairs Mzila Mthenjane says the group had been allowed to continue operating during lockdown as it is considered an essential supplier of coal to Eskom. It had a jump start on other mining groups in its Covid-19 preparedness, conducting self-screening of workers, with suspected cases of infection being reported to medical practitioners for quarantining. Thermal scanners are used at all business unit access control points, and those registering body temperatures above 38 degrees are sent home and referred to medical practitioner.

Harmony head of corporate affairs Harry Mashego says the group kept tabs on the geographic location of employees as they departed the mine during lockdown. Joint operation centres with health authorities, police and transport officials have been created to coordinate the return to work. It is left to the human resources department to determine which of the 50% of workers will be allowed to return to work.

You don’t qualify for bank assistance? Good, you’ve dodged a bullet

Written by Ciaran Ryan. Posted in Journalism

The relief packages offered by banks could be the cause of untold legal cases in the months to come. From Moneyweb.

How to hold onto your home, and your rights. Image: Shutterstock

How to hold onto your home, and your rights. Image: Shutterstock

The banks have been commended for their debt relief measures in response to the Covid-19 crisis, but let’s not get too excited about this. The repayment holidays are fraught with legal risks which will only become apparent later in the year. 

Some of the banks have adopted a one-size-fits-all approach that makes no concessions for customers’ individual circumstances as a result of the lockdown. They have ignored solutions that are more viable and beneficial for customers, and this will open up all sorts of interesting legal problems in the months and years to come should those customers default. 

In good standing 

Those who are “not in good standing” – such as those already in arrears on mortgage payments – do not qualify for a repayment holiday, but that’s not necessarily a bad thing, says legal advisor Leonard Benjamin. Banks are still required to negotiate with all customers in good faith, based on each customer’s individual circumstances. 

“They cannot refuse to negotiate, and simply institute legal proceedings that may eventually result in the sale of their customer’s home to recover the debt,” says Benjamin.

“As the banks cannot possibly know each person’s personal circumstances, it is up to customers to make debt relief proposals that reflect their own particular circumstances.

“They must then follow through with their proposal, whether the bank accepts it or not, by paying the bank in accordance with their proposal.

“Banks that ignore properly motivated and viable solutions do so at their own risk, particularly when backed up by actual payments.”

Read: All the Covid-19 relief announced by SA banks so far

SA eases bank rules to free R300bn for loans

Customers do not need the bank’s permission to take a repayment holiday 

This means that even those who do not qualify for a three-month payment holiday can take matters into their own hands.

Anyone whose income has taken a knock during the lockdown need only start paying again when their finances improve, and then they can pay what they can afford, even if it is not what the bank demands.

This chimes with the National Credit Act, which is intended to balance the rights of lenders and borrowers and encourages the eventual satisfaction of the consumer’s obligations. 

From the consumer’s perspective, spreading the accumulated arrears over the full remaining term is probably the easiest way to catch up on any missed payments. You can do this without the bank’s permission, say Benjamin.

In effect, you can award yourself a repayment holiday.

In most cases, this will mean paying just a few hundred rands extra each month once you are in a financial position to do so. The banks will get short shrift from the courts should they try to claim you are in default. All you need to do is show that you can again start making payments on your mortgage bond.

How interest rates changes automatically extinguish arrears

All home loan agreements allow the banks to adjust repayments whenever there is an interest rate change. The effect of the adjustment, if done in terms of the loan agreement, is to spread the arrears over the remaining term of the loan, which extinguishes the lump sum arrears.

Banks have denied the arrears are extinguished by any change in interest rates, but they are flat wrong, says Benjamin. All you have to do when there is a change in interest rate change is pay the new instalment on your loan to bring your account up to date. 

Therefore, any attempt to claim the customer remains in default when the bank has spread the arrears over the remaining term of the loan amounts to ‘double-dipping’ – claiming twice for the same thing.

Read: Congratulations, your mortgage arrears have been extinguished

Banks are bracing for a wave of defaults

There’s no question that the banks are bracing for a wave of defaults. Should they rush to foreclose later this year, the courts – once they reopen – will be faced with a jurisprudential nightmare: whether to grant judgments against defaulting homeowners who fell into arrears through no fault of their own, but will be able to resume payments in the near future.

The banks have up to now had everything their own way and have faced little opposition in the courts. After the 2008 financial crisis, tens of thousands of South Africans were booted out of their homes after falling into arrears by as little as R6 000.

This time it’s going to be a lot tougher for the banks, if only because consumers are better informed and there are more legal resources on their side, such as Stellenbosch University’s Law Clinic and the Legal Resources Centre.

Legal timebomb

The government has already anticipated the potential legal timebomb by placing a freeze on evictions during the lockdown. But what happens when the lockdown is lifted?

Forensic accountant Andre Prakke says anyone finding themselves facing foreclosure as a result of the lockdown must ask the court to hold the matter over until those cases with substantially the same arguments are properly decided by the court.

“One reason for doing this is it will stop courts in various jurisdictions giving conflicting rulings. It will also allow people in the same boat to get a proper team of experts together.”

Prakke says a collective approach obviates the need for individuals facing foreclosure to each hire their own attorneys. 

This is an excellent idea says, Benjamin. “It contemplates that the issues are dealt with before a full court rather than on a piecemeal basis. The various banks will, for instance, be able to explain to the court how they can calculate different instalments when there is a rate change, when the evidence suggests they are trying to win judgments against consumers who are not in default. It will also give the various public interest organisations that focus on this area of law the opportunity to come on board as a Friend of the Court to add their considerable acumen and input to the deliberations.”    

Debt counsellor Michelle Barnardt says the National Credit Regulator needs to be added as a respondent in any case brought by the banks, since its job is to balance the rights of lenders and consumers. 

Finally, the constitutional issues of snuffing out someone’s income

Several lawyers have already pointed out constitutional issues surrounding the lockdown. A bank foreclosing on a homeowner whose income was snuffed out by the government lockdown could argue a laundry list of constitutional violations, from arbitrary deprivation of property to the rights to life and dignity. 

We are in for interesting times on the legal front in the months ahead.