No rescue package for mines yet despite crisis

LEKOPANYE MOOKETSI
Correspondent | Tuesday December 16, 2008 00:00

 

The Minister of Minerals, Energy and Water Resources, Ponatshego Kedikilwe, said not only BCL and Tati Nickel mines were affected but that revenues from mining were declining as a result.'First, the international financial market situation is fluid,' Kedikiwe said. 'Second, paradoxically, the very assistance that the government might potentially use would have come from the tax revenue generated by the very mining operations which are running dry of resources because commodity prices are tumbling down. 'Third, traditional sources of income for assisting mines like BCL, the diamond mines, are also under financial strain. We are, however, constantly monitoring the situation, which continues to change quite rapidly, and will work closely with mining operations to ensure that they are able to survive these difficult times.'

He assured Parliament that the situation was being closely monitored and that any possible assistance was likely to depend on the nature of the assistance required, for how long, and self-help inputs by the mining operation in question.

From end of August to the middle of November this year, nickel prices plummeted from about USD 9.4/lb to USD4.8/lb. During the same period, copper prices dropped from US3.8/lb to USD 1.6/lb, while gold prices fell from some USD839/oz to USD737/oz.

'The drop in nickel and copper prices is clearly putting considerable pressure on the financials of BCL and Tati operations,' Kedikilwe said.To mitigate the fall in commodity prices, mining companies were already implementing initiatives to contain costs (including staff costs) and conserve cash as much as possible. By and large, the minister said, mining operations were now limited to 'stay-in-business' costs.

Kedikilwe was responding to a question from the Member for Selibe-Phikwe West, Kavis Kario, who had wanted to know what effect the worldwide economic meltdown was having on commodity prices, particularly nickel, copper, cobalt and gold prices. Kario was especially interested in the effects of declining commodity prices on BCL and Tati Nickel mines.

He had also wanted to know how the minister intended helping the mines to remain afloat in case prices were so negative as to affect the viability of some of the operations.