Global accountancy and consulting group PwC released its annual review of South African mining on Thursday 26 September. This is a snapshot of the sector’s performance in a range of areas, and a few details are eye-catching.

One is the performance of the JSE-Mining Index (in USD terms) compared with the global HSBC Mining Index from 2003 to 2019. Surprisingly, the JSE index for the most part effectively mirrors the HSBC gauge, despite the significant policy, labour, social and power challenges that confront the South African industry. Does this indicate that it’s all about commodity prices, regardless of where the minerals and metals are being extracted?

Not quite: a closer look shows the JSE index begins to lag behind HSBC from around the middle of 2015 when uncertainty over the new mining charter casts a pall of gloom over the sector. The JSE caught up in 2019 as share prices here surged, led by a dramatic turnaround in the platinum sector and a bull run in the price of gold, triggered by global market and economic volatility.

Another important point is that the JSE index includes secondary listings by global heavyweights such as BHP and Anglo American. It does not just reflect sentiment towards the domestic industry.

More revealing, perhaps, is its performance against the JSE All-Share index. It tracked it closely and topped it at times until around 2008, when the paths diverged into a chasm. It has been regaining lost ground the past couple of years, but the All-Share has risen almost six-fold over the past 16 years while the mining index has grown three-fold. So mining shares overall have not been as good an investment despite their recent impressive gains, which has seen market capitalisation over the past year almost doubled to R884-billion.

And in an economy originally built by gold, coal remains king. Coal generated 28% of South African mining revenue in the year to the end of June 2019, followed by platinum group metals (PGMs) at 23%. Gold maintains its steady slide, accounting for 13% compared with 16% the previous year.

But growth lies elsewhere.

“Manganese, iron ore and chrome are the only commodities that have seen real production growth over the last 15 years,” PwC said. Indeed, since 2004, manganese production has soared four-fold while gold output is less than half of what it was 15 years ago.

Manganese is used to strengthen steel, so its fortunes tend to mirror those of iron ore. It is a crucial commodity for infrastructure and industrialisation, and research is being done on its application for battery metals in electric vehicles. In South Africa, it is generally mined with mechanised methods in shallow or open-cast conditions, which raise productivity and reduce costs, adding to its attraction.

South Africa’s Kalahari Basin in the Northern Cape, according to South32 which mines there, is home to 80% of the world’s known manganese deposits. From gold to platinum to manganese, geology has blessed South Africa, even as the social and economic framework built from it has historically often been an exploitative curse.

South Africa’s gold industry is riding into the sunset, but the sun is rising over other commodities. And if manganese cracks the EV market, high noon may be some way off. BM