November mining figures impress, but volatility seems to be on the cards

JOHANNESBURG (miningweekly.com) – While the local November mining production statistics showed a relatively solid increase of 6.5% year-on-year, bolstered by platinum-group metals (PGMs), iron-ore and coal, the longer-term prospects for the industry remain less certain, owing to a difficult operating environment and policy uncertainty, according to Nedbank economists Busisiwe Radebe and Dennis Dykes.

In Nedbank’s mining production overview released on Tuesday, the economists were encouraged by the month-on-month growth in mining production from 5.2% in October, but noted that the 12.3% year-on-year growth in PGMs, 20.7% growth in iron-ore and 8.5% growth in coal, were counteracted by declines in the production of gold, copper, diamonds and building materials, which shaved off 1.3, 0.3, 0.2 and 0.1 percentage points respectively.

Meanwhile, pointing out that mining figures are currently volatile, Radebe and Dykes highlighted that, while these “on their own” had very little impact on the Reserve Bank’s monetary policy decisions, the interest rate outlook for the year ahead was clouded by the possibility of renewed rand volatility as the next round of sovereign rating updates approaches.

“[This is] amid severe financial and management crises at many State-owned enterprises, worsening government finances and heightened political uncertainty. These factors will probably convince the Monetary Policy Committee to leave interest rates on hold in 2018,” they pointed out.

On a seasonally adjusted basis, mining production decreased by 0.7% month-on-month in November and by 1.1% quarter-on-quarter for the three months to November.

“The drag on the quarterly figure was the result of declines in the production of diamonds, gold, chromium ore and building materials,” the economists outlined.

Growth in mineral sales increased to 14.3% year-on-year in October from 6.4% in September, boosted by contributions from the coal, manganese ore, iron-ore and gold categories.

On a seasonally adjusted basis, mineral sales increased by 5.2% month-on-month in October and 8.8% quarter-on-quarter for the three months to October.