Johannesburg: When South African miners are allowed to recall all their workers as lockdown restrictions ease further on Monday, full production will remain elusive as the pandemic upends operating practices.
Social distancing, screening and testing will hamper the country’s deep-level mines, which have been operating with half their workforce since a five-week shutdown ended at the beginning of May. Virus flare-ups are temporarily closing individual gold, platinum and chrome operations. This new normal could curb output and erode profitability.
“We could see a reset in South African mine production capacity lower, even once government mandated employment capacity restrictions have been lifted,” RMB Morgan Stanley analysts, including Christopher Nicholson, said in a note.
With transport to the mines beginning as early as 4 a.m., it takes four to five hours to get tens of thousands of workers underground as screenings and other health protocols slow the start of the morning shift, said Johan Theron, a spokesman for Impala Platinum Holdings Ltd.
“Even in a perfect situation with all our workers safely back at work, given the precautionary measures under which we now operate, it is hard to see a return to full operational efficiency,” said Theron.
Implats, as the Johannesburg-based producer is known, has also suffered more severe disruptions. After workers tested positive for Covid-19 in mid-May, the company shuttered its Marula mine and quarantined employees. Now, it’s reopening the operation after a second and third round of confirmatory tests came back negative for most of the 19 staff.
Implats is not alone. AngloGold Ashanti Ltd. shut its Mponeng mine after almost 200 workers tested positive for the virus, while Harmony Gold Mining Co. scaled down work at its Kalgold operation after some employees were infected. Assore Ltd. suspended operations at its Dwarsrivier chrome mine for more than two weeks this month after some workers tested positive.
The mining workforce will double to more than 400,000 in June, said Roger Baxter, chief executive officer of Minerals Council South Africa. So far, 320 workers in the industry have tested positive for Covid-19, with the lobby group projecting that the pandemic will cut output by about 10% this year, he said.
“With more than 200,000 people possibly coming back into the industry over the next three to four weeks, we are going to see an escalation in the numbers of positive cases, but we will manage them through testing, screening and making sure people are isolated,” Baxter said.
Harmony CEO Peter Steenkamp said on Tuesday that, barring any further Covid-19 disruptions, it would take about a month to ramp up operations as the company brings back workers, some from neighboring countries.
The uncertainty surrounding the pandemic is clouding the financial outlook for producers.
“Many mining companies haven’t given updated guidance, which tells you just how difficult it is to quantify the impact,” Arnold Van Graan, an analyst at Nedbank Ltd. “It’s too early to make a call on the future of the industry, but the mining industry has shown in the past that it can adapt.”
Given the current operational challenges, the industry’s future may hinge on a global solution being found to neutralize the virus, said James Wellsted, a spokesman for Sibanye Stillwater Ltd.
“We may not even get to 100% capacity at the deep level mines until a vaccine is found or some sort of immunity takes place,” Wellsted said.-Bloomberg