PwC report highlights mining investment and commodity pick-up

0:00You're listening to the Money Will, SAFM Market Update podcast. The team at PWC released their annual mining report this week and it points to a mining sector that has been robust, not just in this current calendar year, but for a number of years we're going to take a closer look at this with the partner for energy utilities and resources here in said PWC. We saw a good lunch, a joint's been on the line now to see what we make of this. We saw lovely having you on the show. Thanks so much for taking the time. Mining stocks, the mining sector, one of the most important sectors of the South African economy, clearly performing well this year, but we did come into the year with very high expectations and it seems the mining companies have been able to meet those expectations. They really have to me and this applies to your precious metals, so your gold, your PGM mining companies where prices have been quite high and resulting in revenue numbers increasing significantly and flowing through to the bottom line. What we've seen though is that

1:02it's different for the bulk commodity and their pressure in terms of prices and then what we also found is that the exchange rate didn't play a ball so it was stronger and therefore the revenue translates into rents so pressure there because their costs are in rent and also the logistical challenges that the bulk commodities have. So an improvement, a small improvement that they have seen from the Unisay able to export but the challenges still remain but a good performance by the mining companies especially in your precious metals. We saw on a take a look at the broader resources sector and how that's been performing over the last couple of years. It really has been outperforming and outpacing the rest of the all share index, especially if we look at it from a two year, five year and even a ten year period. Exceptional performance, I mean the last couple of years looking at the graphs you've got in the publication, you can look at it five years, two years, exceptional performance that the resource sector has done and I think it goes with prices. So the share prices usually follow what

2:06you will see, what with prices happening. Gold has been climbing now. I think this is the second year in a row where it's going up and the share prices will follow. So we see that also with your PGM, share prices will follow. So there is a trend when you look at what share prices do of your mining companies and prices. What we've also seen in the current share is that with these new projects that are coming through which is great for the country. So share prices such as Penn African resources have done exceptionally well. When they've come out and say we're starting our brand feels restarting them. We have new projects that we are undertaking. So that also has pushed share prices in the sector, compared to your share index. We're speaking of new companies and new players in the space. New commodities seem to be in focus. The critical minerals bunch, South Africa has quite a few of those in the form of lithium cobalt, manganese, nickel, copper, zinc amongst some of them. That from a competitive advantage point of view is quite interesting to

3:10see the momentum that critical minerals have been garnering over the last couple of years. It's been a very hot talking point from a mining investment perspective. How are you seeing the critical minerals side of the mining sector? It's very clear that we've got a huge demand but supply becomes an issue. And therefore it's important because we all know we transition. Nobody can stop the transition that is happening. And therefore these minerals are key. In South Africa, like you have mentioned, we do have some of the critical minerals. The problem here in South Africa is unlocking that value. So one of the ones that we have is meganese for instance is one of the critical minerals. And when you sit and listen to discussions and you see the numbers that the meganese companies are coming through, they're struggling to export. So your logistical challenges become a key focus for those critical minerals. In South Africa, I think critical minerals are there definitely. We've done our

4:11resource base. I mean, there's been discussions here at the mining in that way if we've done enough, but we do know we've got the critical minerals. Do we have the plan to ensure that we execute on them and ensure that we also delivering into this need and there isn't need. And I think as long as we just have in discussions and not putting it in place, that becomes the challenge. Which if we look beyond the South African borders and the performance of South Africa's mining sector, how is our mining sector faired against perhaps some of our global peers, whether we're looking at emerging market peers, whether we're looking at more established mining sectors, we're seeing a lot of interest from our own local miners to find opportunities in offshore markets. And I wonder how that's now starting to factor into things like strategic decisions from a business perspective. So with the invest and that's one of the conversations that is continuously being had in South Africa, is that we are competing for investment with other countries. Do we have the resources, do we have

5:12the reserves, we definitely do have those. So we've got the all, we've got all of these things and we're in a good position. But it's on how do we attract and it's the risk that it's associated with South Africa. So we're looking at things like regulatory uncertainty, we're looking at the challenges we've got. For example, logistics, electricity and electricity is not so much of an issue as it was previously. The big things is being able to attract and giving investors that security that your investment, because your returns usually in mining take longer than in other industries. And it's quite expensive to build infrastructure. So you're think a shaft or a processing plant. And therefore your returns come after a number of years. So they need to be policy certainty for these investments to come. So in our global publication that we released around June, we looked at that and we said, well, what are the Canada's, your U.S. and all these other countries that are able to attract investment? What are they giving investors that South Africa or that is

6:15critical? And it's those kind of things, regulatory uncertainty. Ensuring, for example, your permitting is very quick transparent, you know. So the government and is controlling what they can control, to ensure that investor say, okay, you've got the minerals, yes, check. Is the risk high? Well, no, I'm lowering my risk because I'm giving you comfort that on permitting, it won't be an issue, it's transparent. Regulation is clear. Actually, our tax regime is quite good. So there's certain things that businesses or investors are looking at. And that's one of the things that we are still a bit behind in South Africa or working towards. We saw before, let's go. I want to take a look at beneficiation. What of that conversation have you noted from your report and from your research? Beneficiation is critical in terms of value add. I mean, in a lot of industries that we've got, so your PGA and your gold, you'll find that by the time it leaves South Africa, you're sitting

7:15at almost 100% in terms of purity. So the next step for some of the industries would be, for example, jewelry making or vehicle making. But then you have other ones, for example, in your chrome, where you would look and say, beneficiation, there's process or there is space to be able to beneficiate. But that also comes with other questions. So you need stable electricity because that's costly. And we have seen, for instance, that some of the smalters and other huge energy consumers, which you need for beneficiation, that's not happening, right? It's expensive, they're shutting down. It's a process. And so it becomes a security, but also a price thing, where you can able to beneficiate. So, beneficiation important would increase jobs, would provide more revenue for the country. But there needs to be things in place to be able to ensure that beneficiation happens. And those are key electricity, logistics, all of that play into a role and are we able to beneficiate? The mining sector of South Africa performing exceptionally well this

8:18year. And in the last couple of years, at least according to the team at PWC, as they released their latest 2026 edition of their mining report, will leave the conversation on that note, partner for energy utilities and resources assurance at PWC. We saw Kutland joining us to take a look at their mining report. You've been listening to another money web, S.A.F.M market update podcast, uploaded weekdays at 7pm. For more money web podcasts, go to moneyweb.co.z, all the app and follow money web news for daily updates.