Making an investment in the mineral wealth of South Africa while precious metals are low in price globally, is one way to capitalize on the general decline in value for commodities at the present time. The country is a world leader and virtual treasure house of a number of valuable minerals. South Africa has become a key player in the global mining industry and has been so for generations. It has been the driving force behind making the country the richest and most advanced country on the continent. South Africa has the second largest economy in Africa after Nigeria.
South Africa has a population of around 54 million, making it the 25th most populous nation in the world. The country encompasses 471,443 square miles (1,221,037 km2). This makes it the 25th largest country in geographic size.
The nominal GDP (Gross Domestic Product) is $341.216 billion USD (United States Dollar). This would be the 34th largest in the world. Per capita that equals $6,354 USD. The GDP in Purchasing Power Parity (PPP) for 2015, puts the country at $711,768 billion USD. This would rank it 30th in the world. Per capita that would be $13,077 USD.
The total mineral wealth of the country is estimated to be at $2.5 trillion USD. Overall, the country is calculated to have the world’s 5th largest mining sector in terms of GDP value.
South Africa mined gold production, 1940-2011
South Africa has an economy that was built on diamonds and gold. The mining sector has always been an important foreign exchange earner. Today, gold alone accounts for 1/3 of South African exports. As recently as 2009, the country had the 4th largest diamond industry in the world. The majority of these exports are destined for Asia, particularly Japan, Europe and North America. It is still probably the 5th largest gold producer as of 2014.
The nation has the world’s largest reserves of manganese (80%) platinum (87.7%) and the platinum group metals known as (PGM). South Africa has been identified as having among the largest reserves of gold (35%), diamonds, chromite ore and vanadium found anywhere. The nation is also a major producer of coal and is the 3rd largest coal exporter in the world. As part of the inventory of the country in addition to precious metals, there are energy minerals, non ferrous and ferrous minerals, as well as industrial metals.
South Africa Coal production (red) and exports (black)
South Africa is still the largest producer in the world of chrome, manganese, platinum, vanadium and vermiculite. It is the second largest global producer of ilmenite, titanium, palladium, rutile, and zirconium.
An advantage for extraction companies operating in South Africa, is that they are world players with a high level of technical and production expertise. There is an abundance of research and development to increase efficiency in the processing of minerals of various kinds.
South Africa has the advantage of possessing first rate production facilities for precious metals like gold and platinum, as well as for aluminum and stainless steel. The country has been one of the first that converts low grade iron ore into high quality iron. The country is a huge producer of iron ore and in 2012, overtook India to become the 3rd largest supplier of ore to China, which is the largest consumer in the world.
Another advantage for the companies with dealings in South Africa is the vast potential of future discoveries in the mineral rich country. There is a wide variety of possible sites that can be investigated for future exploitation. Given the past finds, it is safe to assume there will be major new discoveries in the years ahead. As commodity prices recover globally, these deposits will have an increasing value.
The mineral wealth of the country at present, is concentrated in several notable areas of the country. The Witwatersrand Basin yields some 93% of the country’s gold output. One can also find uranium, silver and pyrite there. The Bushveld Complex is known for the platinum group metals. You will find enormous deposits of manganese and iron ore in the Transvaal Supergroup. The Karoo Basin is where substantial bituminous coal and anthracite resources can be found. The Phalaborwa Igneous Complex houses extensive stores of copper, feldspar, phosphate, titanium, vermiculite and zirconium ores. Kimberlite pipes host diamonds, heavy mineral sands containing ilmenite, rutile and zircon. There are significant stores of lead-zinc ores with copper and silver found in the Northern Cape.
The importance of South African mineral resources to world industries and manufacturing cannot be overestimated. The role of platinum for example, as a catalyst for chemical reactions makes the metal vital, in the reduction of carbon monoxide in the car exhaust of diesel engines. Palladium plays a similar role for gasoline powered vehicles.
There are challenges to investing in companies that are in the mineral extraction and processing industry located in South Africa. There is continued hostility towards mining companies in the country including whole segments of the population and many members of the government itself. Issues of asset allocation of the wealth generated by the industry, is an ongoing debate within the country. There are numerous labor strikes and new environmental concerns.
Another major issue, is the lack of investment in various aspects of the industry including infrastructure in some areas of the country. This will have a detrimental impact on future growth, if this more recent phenomena is not reversed accordingly.
The mining companies both large and small, that will survive and thrive, are those that will be able to adapt to the changing conditions of the country. This will be on both an economic and political level. There are a few corporate giants and hundreds of smaller, ongoing operations. Increasing controversy associated with Russian aggression, is likely to lead to embargoes and trade barriers of vital mineral exports from that country. This will provide new opportunities for the companies operating in South Africa. The key to investment success in the sector, will be to determine which companies will profit the most from the changing conditions in the industry. This would not only be within the country, but on a global scale as well.