MINERS expect growth of up to five percent this year with all nickel producers and more than half of gold producers planning to increase output, a mining research has shown. A survey on the Status of the Mining Sector 2015 commissioned by the Chamber of Mines that was launched last week said that about 20 percent of respondents were bullish that they would grow by at least five percent.
“About 30 percent planned to grow output by between one percent and four percent. About 10 percent planned to maintain their output, while 40 percent projected another decline in mineral performance in 2016,” the survey says.
Gold led the way in 2015 rising by 30 percent and platinum by one percent while 10 percent remained flat. Chrome recorded the steepest decline of -48 percent, followed by coal at -34 percent, diamond at -30 percent and nickel recorded a negative three percent.
Despite the depressed commodity prices nickel and gold producers said they would increase output in 2016.
About half of coal and 33 percent of platinum producers are planning to increase production while 50 percent of diamond producers expect to ramp up production this year.
The increase in production capacity is expected to compensate for the decline in output recorded last year. In 2015, the value of mineral output fell by 13,1 percent mirroring the decline in output.
“Two major reasons were cited for the decline in mineral earnings: low output and subdued prices,” the survey showed.
The slowdown in mineral output resulted in the decline in the total value of minerals generated last year by seven percent to around $1,8 billion from $1,95 billion in 2014.
“The data collected shows that average capacity utilisation in the mining sector declined to 60 percent in 2015 from 71 percent in 2014. A steepest decline in capacity utilisation was recorded in chrome which slumped to 29 percent from 67 percent and coal down to 20 percent from 34 percent,” the survey showed adding that the platinum sector continued to operate at full capacity.
All the respondents operating below full capacity cited capital shortages as the major constraint, followed by shortage and high cost of power and high input costs. Sample data shows that the mining industry is relatively capital-intensive. About half of the respondents — 54 percent indicated that their operations were capital-intensive; 31 percent moderately capital-intensive and 15 percent labour-intensive.
The Survey identified four major cost drivers that cut across the entire mining industry: wages, stores and supplies — 36 percent, power 15 percent and royalty five percent.