Illegal mining worth R7bn a year - PwC

JOHANNESBURG (miningweekly.com) – The value of illegal mining and dealing of metals and diamonds in South Africa is estimated to be more than R7-billion a year, says PwC.

In its latest edition of 'SA Mine', the professional services firm equates this to revenue generated from 430 000 oz of gold at the current market price.

This ninth-edition work was released shortly ahead of the legitimising of hundreds of illegal diamond miners in Kimberley by Deputy Mineral Resources Minister Godfrey Oliphant.

The former diamond 'zama-zamas' are now permitted to mine a diamond tailings dump and 500 ha of diamondiferous ‘floors’– both surface assets – following engagement with private sector company company Ekapa Mining Joint Venture. Unconfirmed reports state that this came at a cost of R30-million to Ekapa, in which the London-listed Petra diamond mining company is the joint venture partner.

PwC identifies the drivers of more-frequently-occurring and often deadly illegal mining as poverty and unemployment, with desperate people taking desperate measures to put food on the table.

“Furthermore, many retrenched miners have extended families that are financially dependent on them, which creates additional pressures,” it adds.

In announcing the move to legitimise the former illegal miners, Oliphant made the point that the issue of mining permits would enable the miners to trade their diamonds in the formal market, which would translate into a many-fold increase in the prices they would fetch for their diamonds.

SA Mine reports that a recurring theme with many illegal miners who have been arrested is that they previously worked in the formal mining sector but had been retrenched as the industry struggled with low commodity prices and other challenges.

While South Africa’s own socioeconomic challenges make illegal mining a lucrative alternative, South Africa’s neighbouring countries, also with high levels of poverty and unemployment, provide a further supply of workers for the illegal trade.

According to Forbes and African economic outlook, Zimbabwe has 95% unemployment, Mozambique 24.49% and Lesotho 30.63%.

Mineral Council South Africa reports that 70% of illegal miners arrested are undocumented foreign nationals.

It is common practice for legitimate mineworkers to be paid by illegal mining syndicates to transport food and other essential items underground to enable illegal miners to work underground for long periods without having to come to the surface.

Four listed companies – AngloGold Ashanti, Harmony Gold, Pan African Resources and Sibanye-Stillwater – reported an impact on their businesses with gold the common denominator product and the South African gold sector the most adversely impacted by illegal mining.

But Oliphant made it clear to journalists at last week’s Junior Indaba that legitimising illegal mining in deep, dangerous and often abandoned mines would be a major challenge and far more complex than legitimising the surface diamond miners of Kimberley.

Meanwhile, gold’s high value, the large number of abandoned old gold mining areas and the relative ease of finding willing buyers has made it a commodity easily targeted for illegal mining.

PwC notes that instances of illegal mining have also been observed in the chrome and coal sectors.