Not a chance, says project owner Orion Minerals. From Moneyweb.
It started with the construction sector, and has now moved into mining. The so-called construction ‘mafia’ appears to have jumped the fence to mining, renewable energy, in fact anything that can turn a quick buck.
The Prieska copper-zinc project in the Northern Cape is the latest to get a visit from a so-called local ‘business forum’ eager to negotiate its way into the proposed mine’s spending budget.
Earlier this month the mine’s lawyers approached the Northern Cape High Court for an urgent interdict after members of a forum purporting to represent the community, some of them wielding semi-automatic rifles, held protests across Prieska and outside the mine gate.
“We’ve taken a firm stance against those involved in stirring up the local community to disrupt our plans to restart the mine,” says Orion MD Errol Smart.
“They have been telling members of the community that we will not be hiring locals, or using local subcontractors, which is not true. We have always made it clear we will be hiring locally and doing local enterprise development.
“It starts with an invitation to engage from people purporting to represent the local community but they very quickly make it clear that they will get the community to protest unless you give them what they want,” says Smart.
“The people making the noise are probably 100 out of a community of 20 000, and they are also targeting other businesses in the Prieska area.”
Smart says one of the advantages of operating in SA is the ability to approach a court to obtain an injunction to prevent destructive elements from trying to stop commercial development.
“If this was in Democratic Republic of Congo or some other African country, it would be much more difficult to get the support of the courts.
“Once we had the injunction, we were able to get the Public Order Policing Unit to come and disperse the protesters.”
Incidents such as these explain why SA companies attract a discount among foreign investors, adds Smart.
Source of disturbance
The source of this disturbance is the Preferential Procurement Policy Framework Act which allows 30% of all contract value above R30 million on state construction contracts to be allocated to certain designated groups, including black-owned small and medium-sized enterprises.
The regulations do not apply to private sector construction contracts, but this has not deterred local forums who sow confusion over the preferential procurement policy.
DA shadow minister of mineral resources James Lorimer says Orion is one of just a few medium-sized mining projects in SA that is proceeding despite onerous BEE requirements stipulated by the Mining Charter.
“It [Orion] has been at great pains to ensure its BEE requirements involve local people, rather than by empowering black players in the industry who have already been empowered previously. This project and all medium and major mining projects in South Africa are struggling to make the case to international investors.
“If the situation in Prieska is allowed to persist, it will send a signal that mining in South Africa is uninvestible,” said Lorimer, writing in Politicsweb.
The Prieska copper-zinc mine is a landmark project intended to showcase to the world that South African mining is alive and well.
In a country starving for fresh mining investment, Prieska was the pace-setter.
The ‘mafia’ started showing interest after Australian-based Orion Minerals completed its bankable feasibility study in May 2020.
“It then became clear that we would start appointing contractors and project managers, and this was when the local business forum started to change their previous constructive engagement with us, to unrealistic and unsustainable demands,” says Smart.
The copper-zinc project is a revival of the old Anglovaal Prieska copper mine that closed down in 1991 after a halving in copper prices. Orion believes it has found a way to make the project work using more efficient mine design and improved mining and processing technologies.
The mine will require R4-5 billion in funding, of which 80% will be spent within SA. The feasibility study targets approximately 22 000 tonnes per annum (tpa) of copper and 70 00tpa of zinc in the initial 12-year operating phase, though Smart says a 20-year lifespan seems increasingly realistic as more data comes to light.
Minister of Mineral Resources and Energy Gwede Mantashe is keen to get the project kicked off, given the signal this sends to the rest of the world.
Copper prices have been on a tear since April 2020, more than doubling in price in the last year.
Copper in US dollars, May 2021
Highlights from the latest bankable feasibility study:
- 43% increase in pre-tax free cash flow to Au$1.6 billion (R19.2 billion)
- 36% increase in pre-tax net present value (at an 8% discount rate) to Au$779 million (R9.3 billion)
- five-month reduction in the capital payback period to 2.4 years; and
- 6% decrease in all-in-sustaining costs to US$3 531/t (US$1.60/lb) of copper equivalent metal sold.