SA might not reap full benefits of global mining rebound – analyst

JOHANNESBURG– Growing physical demand for commodities, a strong possibility of speculative buying and rising prices were expected to give the global mining industry a boost in 2010, but South Africa might not reap the full benefits of a rebound, a metals and mining analyst said on Monday.
Frost & Sullivan analyst Wonder Nyanjowa said on Monday that while the extent of the global economic recovery remained uncertain, commodity prices were likely to put up a strong performance and that mining companies were likely to expand production capacity.
However, some challenges particular to South Africa could dampen local prospects.
“Many of the local challenges that adversely impacted on production in 2009, such as electricity supply shortages, a lack of skills and safety concerns, are likely to continue affecting the performance of the mining industry in 2010,” he said in a statement.
Nyanjowa believes that growing inflation fears in the developed world, particularly the US, an unstable US dollar, threats of another recession from expansionary fiscal and monetary policies and negative real interest rates pointed towards a strengthening investment demand for gold.
“A price range of $1 300/oz to $1 500/oz in 2010 looks likely, supported by gold demand and supply fundamentals,” he said.
Last week, metals consultancy firm GFMS said the price of gold could climb to $1 300/oz in 2010, exceeding the 2009 record of $1 226/oz.
South Africa’s gold production was likely to slip further this year, to around 200 t.
While platinum was one of the biggest casualties of the global recession, Nyanjowa expected things to be much rosier in 2010.
“Frost & Sullivan anticipates that the platinum industry will recover this year on the back of stronger prospects of recovery in the global automotive sector, particularly in China and India. The launch of two new platinum-based exchange-traded funds in the US will also lead to strong investment demand.”
The platinum price rallied to its highest level in over 17 months on Monday, with the spot price reaching $1 626/oz.
Further, Nyanjowa said that coal miners should remain robust.
He expected the domestic demand for coal to continue to grow in 2010, following expansion programmes at State-owned Eskom and synfuels producer Sasol, which would require an additional 75-million tons of coal.