THE BENEFICIATION

STRATEGY FOR THE

MINERALS INDUSTRY OF

SOUTH AFRICA

PRESENTATION TO THE SELECT COMMITTEE ON

ECONOMIC DEVELOPMENT

30 AUGUST 2011

PRESENTATION OUTLINE

Basis for Mineral Beneficiation

Broad Vision

Beneficiation Value Proposition

Strategy Development Path

Global Economic Perspective

South Africa’s Comparative Advantage

Strategy framework

PRESENTATION OUTLINE (Cont...)

Cross Cutting Constraints and Interventions

Pilot commodity value chains

Concluding remarks

White Paper: The Reconstruction and Development Programme (November 1994)

“Mining and minerals products contribute three-quarters of our exports and the industry employs three-quarters of a million workers, but this could be much higher if our raw materials were processed into intermediate and finished products before export. Our RDP must attempt to increase the level of mineral beneficiation through appropriate incentives and disincentives in order to increase employment and add more value to our natural resources before export. Moreover, this policy should provide more appropriate inputs for manufacturing in South Africa.”

BASIS FOR MINERAL BENEFICIATION

White Paper: A Minerals and Mining Policy for South Africa (October 1998)

“The aim of the policy will be to develop South Africa’s mineral wealth to its full potential and to the maximum benefit of the entire population. Government, therefore, will promote the establishment of secondary and tertiary mineral-based industries aimed at adding maximum value to raw materials.”

Section 26, MPRDA, 2002

The Minister may initiate or prescribe levels of beneficiation of minerals in the Republic

BASIS FOR MINERAL BENEFICIATION

THE NEW GROWTH PATHSets a target of creating 5 million jobs in 10 yearsIdentifies structural challenges that impede desired growth rates, including

Logistics, energy infrastructure and skills, which raise costs Economic concentration and price collusion in key parts of the

economy, which raise costs and limit innovation and new enterprise development

An uncompetitive currency that limits employment growth in manufacturing, mining, etc.

A persistent balance-of-trade deficit funded with short-term capital flows attracted largely at high interest by international standards

Seeks to place the economy on a production-led trajectory with growth targeted in 10 ‘job drivers’, including, inter alia:

The mining value chain, with a particular emphasis on mineral beneficiation as well as on increasing the rate of mineral extraction

BASIS FOR MINERAL BENEFICIATION

Increase a ratio of beneficiation extent to mineral production and increase export revenue

Facilitate economic diversification

Expedite progress towards a knowledge based economy

Create opportunities for new enterprise development

Contribute to creation of decent jobs and poverty alleviation

BROAD VISION

BENEFICIATION VALUE PROPOSITION

0100200300400500

Pri

ces

($/t)

Source: DMR

BENEFICIATION VALUE PROPOSITION (Cont...)

An initial research study (DMR/MINTEK)

Selection of pilot commodity value-chains informed by areas of greater opportunity

A draft beneficiation strategy

Dedicated task team (inter-departmental) – DMR, DTI, DST, NT, DPE, Presidency

External stakeholder consultation

Approval of strategy by Cabinet

STRATEGY DEVELOPMENT PATH

GLOBAL ECONOMIC PERSPECTIVE

The world has entered into a new growth phase led

by developing economies

This growth will result in increased demand of

mineral commodities such as iron ore for

infrastructure development, consumer products

etc.

Main markets for South Africa’s beneficiated goods

will therefore come from these developing

economies

SOUTH AFRICA’S COMPARATIVE ADVANTAGE

0 10 20 30 40 50 60 70 80 90 100

PGM'sManganese

ChromiumGold

Alumino-SilicatesVermiculiteVanadium

Zirconium MineralsTitanium minerals

FluorsparAntimony

Phosphate rockNickel

UraniumLeadCoalZinc

SiliconIron ore

% of global .South African reserves for key minerals, 2008

1

1

1

1

1

2

2

2

2

2

4

4

5

5

6

8

8

8

9

South Africa, is not mature mining real estate! The country still has significant geological potential

Global rank

In-Situ value conservatively estimated at US$ 2.5 Trillion, excluding energy commodities (coal, uranium, thorium)

COMPARATIVE ADVANTAGE

MINERAL RESOURCES RESERVOIR

[IN SITU VALUATION OF US$2.5 Trillion (Non-energy)]

COMPETITIVE ADVANTAGE

(Strategy Pillars)

•Legislative Framework(MPRDA, DAA etc.)•Multi stakeholder forums (e.g. Platinum Beneficiation Committee)•International trade agreements•Beneficiation strategic interventions

BENEFICIATION STRATEGY

PROVIDES A FRAMEWORK

TO TRANSLATE COMPARATIVE ADVANTAGE

STRATEGY FRAMEWORK

PILOT COMMODITY VALUE CHAINS

10 minerals for 5 value chains

Energy commodities

Iron and steel

Pigment and titanium metal production

Autocatalytic converters and diesel particulate

Jewellery fabrication

PILOT COMMODITY VALUE CHAINS (ENERGY)

Energy vital to any industrialisation process security

of energy supply is of the utmost importance

Main energy commodities are Coal Uranium and

Thorium

Value chain interventions: Quantification of the country’s uranium and thorium reserves

Support for R&D into alternative and future energy sources

(e.g. Fuel cells)

PILOT COMMODITY VALUE CHAINS (IRON AND STEEL)

Steel products are vital inputs into labour intensive

manufacturing processes but anti-competitive

pricing is a major constraint to growth

Value chain interventions: Invoke regulatory provisions to ensure sustainable and

developmentally priced input commodities

Encourage investment into the South African steel

industry to break prevailing anti-competitive behaviour by

competitors

PILOT COMMODITY VALUE CHAINS (PIGMENT AND TITANIUM METAL)

This value chain is a potential key growth area for

the country as increasing levels of urbanisation are

expected to underpin demand for Ti-mineral

concentrates for pigment and aerospace

component manufacture

Value chain interventions: Investigation into the viability of establishing a chlorine

plant in conjunction with a pigment plant

The development of a more cost effective primary

titanium metal production

PILOT COMMODITY VALUE CHAINS (AUTOCATALYTIC CONVETERS)

South Africa accounts for 1 in 10 autocats.

produced globally and tightening emissions

legislation will underpin future growth in this sector

Value chain interventions: Invoke provisions of the law to ensure security of PGM

supply

Development of metal access mechanism

Unlock the intrinsic value within the PGM sector

PILOT COMMODITY VALUE CHAINS (JEWELLERY FABRICATION)

South Africa is the land of gold, platinum and

diamonds and jewellery fabrication is another

labour intensive value chain that will beneficiate

these minerals

Value chain interventions: Establishment of a metal advance scheme

Promotion of existing incentives in the jewellery sector

WAY FORWARD

Development of implementation plans for the five

pilot commodity chains

Implementation plans for other value chains to be

developed thereafter

CONCLUDING REMARKS

Strategy provides coordinated approach to beneficiation

Provides a leverage for RSA to become globally competitive and

optimise mineral resources rent

Fast tracks the country’s economic growth to tackle the challenges of

development

Compliments the NIPF (IPAP) and the NGP

Provides the basis to invoke provisions of s26 of MPRDA to enable

security mineral supply

The strategy is therefore, not a blueprint for individual commodity

value chains, but provides a framework within which value chain

specific interventions will be anchored.

ENDS.....

Alive with possibilities…..

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