This is not a paywall.

Register for free to continue reading.

We made a promise to you that we’ll never erect a paywall and we intend to keep that promise. We also want to continually improve your reading experience and you can help us do that by registering with us. It’s quick, easy and will cost you nothing.

Nearly there! Create a password to finish up registering with us:

Please enter your password or get a login link if you’ve forgotten

Open Sesame! Thanks for registering.

First Thing, Daily Maverick's flagship newsletter

Join the 230 000 South Africans who read First Thing newsletter.

We'd like our readers to start paying for Daily Maverick

More specifically, we'd like those who can afford to pay to start paying. What it comes down to is whether or not you value Daily Maverick. Think of us in terms of your daily cappuccino from your favourite coffee shop. It costs around R35. That’s R1,050 per month on frothy milk. Don’t get us wrong, we’re almost exclusively fuelled by coffee. BUT maybe R200 of that R1,050 could go to the journalism that’s fighting for the country?

We don’t dictate how much we’d like our readers to contribute. After all, how much you value our work is subjective (and frankly, every amount helps). At R200, you get it back in Uber Eats and ride vouchers every month, but that’s just a suggestion. A little less than a week’s worth of cappuccinos.

We can't survive on hope and our own determination. Our country is going to be considerably worse off if we don’t have a strong, sustainable news media. If you’re rejigging your budgets, and it comes to choosing between frothy milk and Daily Maverick, we hope you might reconsider that cappuccino.

We need your help. And we’re not ashamed to ask for it.

Our mission is to Defend Truth. Join Maverick Insider.

Support Daily Maverick→
Payment options

Commodities’ Covid-19 conundrum: Miners have mixed re...

Business Maverick


Commodities’ Covid-19 conundrum: Miners have mixed results, oil majors sink

Anglo American reported an 11% reduction in output and a 16% decrease in revenue in its interim results on 30 July 2020. (Photo: Gallo Images / Sharon Seretlo)

A tale of two commodities asset classes has broadly emerged under the Covid-19 pandemic. Big-league miners such as Anglo American have had a hit in profits while weathering the storm. By contrast, oil majors have had to make massive asset write-offs as their earnings sink like stones.

As expected, global miner and South African corporate icon Anglo American reported a decline in profits in its interim results on Thursday, 30 July 2020. Still, the company is paying dividends and its Kumba Iron Ore unit last week announced a R7-billion mine expansion project in the Northern Cape. The Covid-19 pandemic has hit its bottom line, but the company is weathering the storm.

“The pandemic did materially impact production, with varying degrees of lockdown being the main driver for our 11% overall reduction in output and 16% decrease in revenue, alongside operational incidents at platinum group metals (PGMs) and Met Coal. These reductions were partially offset by strong performances from our Brazilian iron ore and Chilean copper operations. By the end of June [2020], we were back at 90% capacity across the portfolio,” Anglo CEO Mark Cutifani said in a statement.

Anglo, which has its primary listing in London, posted underlying earnings before interest, tax, depreciation and amortisation (EBITDA) of $3.4-billion in the six months to the end of June 2020, a 39% decline compared to the same period in 2019. But Reuters reported that this beat a consensus forecast of $3-billion. Its dividend per share dropped 55% to 28 US cents but, in these tough times, a dividend is a dividend.

“As the global economy recovers, PGMs, copper and iron ore are all particularly well-positioned, while De Beers, as the world’s leading diamond business, is taking all appropriate steps to address the effects of acute disruption,” Cutifani said. Global diamond sales have all but dried up because of the pandemic and lockdown measures to contain it. De Beers is looking at possible job cuts.

Still, the mining industry is in a much better space than the oil and gas sector. 

Royal Dutch Shell and French oil heavyweight Total reported Q2 profit slides of 82% and 96% respectively. This excludes combined asset write-downs of almost $25-billion after the pandemic slammed oil prices and the bottom fell out of demand. 

Closer to home, petrochemicals giant Sasol, which has been reeling from the price shock with large-scale job losses potentially looming, grasped a lifeline this week. The company said on 29 July 2020 that it would sell 16 air separation units in Secunda – the world’s largest oxygen production site – to France’s Air Liquide for R8.5-billion. Sasol has announced asset sales of up to $2-billion and this one gets the company 25% of the way to that target. 

As ever with commodities, it all comes down ultimately to price. Most minerals and metals have not seen their prices collapse the way oil has, or demand evaporate, with the exception of diamonds. Indeed, in the case of gold – which has benefited from its safe-haven status at a time of unprecedented global economic uncertainty – record highs have been reached and new peaks are on the horizon. 

2020 has been a commodities roller-coaster, and the second half of the year is sure to bring more thrills and spills. DM/BM  


Please peer review 3 community comments before your comment can be posted