Peter Major, the internationally respected mining guru from Modern Corporate Solutions, has attended virtually all of Cape Town’s annual Mining Indabas – an event which is now in its third decade. His verdict after this month’s gathering of the global mining’s movers and shakers: because of bad policies, SA is still going backwards – but reforms at SADC neighbours Zambia and the DRC is attracting tens of billions of dollars in fresh investment, creating tens of thousands of new jobs. Major reckons the sector which should be driving SA’s economy forward is floundering because the ANC lost the plot years ago and has been unable to get out of a self-created hole. He spoke to BizNews editor Alec Hogg.
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Relevant timestamps from the interview
00:00 – Introduction – The Current State of Mining Shares
03:22 – The Mood at the Mining Indaba
06:35 – Factors Affecting Mining Stocks in South Africa
08:19 – The Impact of the Election on Mining Stocks
11:20 – Positive Developments in African Mining
14:32 – The Ineffectiveness of the South African Government
17:10 – Potential for Positive Change in South Africa
19:44 – Conclusions
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Edited transcript of the interview ___STEADY_PAYWALL___
Alec Hogg: It’s a well-known fact that the best time to buy stocks is when everybody else is selling them, and the worst time to buy is when everybody else wants them. Right now, nobody wants mining shares. Nobody. Perhaps Peter Major, our go-to expert on mining matters, can shed some light on this. Peter, looking back at an interview we did 10 years ago when BizNews was just starting out, we were hunting for those 10-baggers in the mining sector. It feels like we’re in a similar situation now. Are they wrong?
Peter Major: No, but they might be a bit early. Reflecting on 2013, it took another two years for things to turn around. Capitulation in 2015 marked the bottom. We’re not there yet. Capitulation is when even the toughest give up, like Conor McGregor raising his hand in defeat. We’re low now, but there are reasons for it.
Alec Hogg: You recently attended the mining Indaba in Cape Town, a gathering of mining professionals from around the world. How many have you been to?
Peter Major: It was the 30th anniversary, and I’ve attended most, probably missing only three or four. The mood this year was surprisingly positive despite the recent downturn in mining companies. We’re experiencing a dip after a 20-year super cycle that began in 2002.
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Alec Hogg: Given your extensive experience at the Indaba, can you provide some context on the current situation?
Peter Major: Despite the recent downturn, there’s optimism that this may just be a short-term blip in a longer trend. However, there are concerns about China’s slowing growth and the potential impact on commodity demand. The U.S. market is also showing signs of vulnerability, with earnings nearing all-time highs. This weakness in commodity prices could persist for a few more months.
Alec Hogg: From a South African perspective, platinum shares have been particularly hard-hit. Is this solely due to commodity prices?
Peter Major: You’re absolutely right, Alec. BHP Billiton faces similar challenges with commodity prices as Anglo-American does. However, Billiton’s rating and share price have held up well. This is because the market understands that Anglo-American still derives over half of its earnings from South Africa. Sibanye, too, despite the challenges in the palladium market, still generates the bulk of its earnings from this country. So, you’re correct. These commodity prices aren’t disastrous. Even platinum, trading slightly below its long-term average, is not far off. Palladium remains above its long-term average, as does rhodium.
Alec Hogg: Peter, let’s talk about the upcoming election. The latest intel suggests it might be on May 29th. Are you closely monitoring this and its potential impact on mining stocks?
Peter Major: I’m beyond scenario planning at this point. The environment is too dynamic for that. The election is crucial, but it’s likely to have a negative effect on our companies. Investors anticipate this and won’t be trying to second-guess it. They know it’s going to be tough. If the ruling party cares about the country, they’d hold the election sooner to alleviate the uncertainty. Investors won’t make significant moves until after the election.
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Alec Hogg: Any positive news from the Indaba regarding South African mining?
Peter Major: The Southern African Development Community (SADC), comprising 16 countries including Zambia, the DRC, and Angola, offers some hope. While Zambia and the DRC have their challenges, there’s optimism for improvement. In Zambia, despite obstacles, there’s a sense of progress. Unfortunately, South Africa lacks this hopefulness. The current political landscape has dashed hopes for a better future. On the bright side, optimism surrounds neighbouring countries, and our mining companies are likely to invest where there’s potential for growth and stability.
Alec Hogg: There’s usually a sizeable South African government delegation at the Indaba. Did they make any efforts this time to change perceptions?
Peter Major: Alec, they seem stuck in a rut, repeating the same actions without progress. We saw our mining minister, Gwede Mantashe, attempting to address concerns, but his efforts fell short. He announced plans to create a South African cadastre system by combining three companies, but details like milestones, budget, and timelines remain unclear. This lack of decisive action reflects a broader trend of inertia in our government’s approach to mining.
Alec Hogg: So, given this inertia, if there were a positive outcome in the election, with parties prioritising economic growth, it should be straightforward to reverse the current trajectory, right?
Peter Major: Absolutely. The situation is so dire that even incremental improvements would yield significant gains. If we could wave a magic wand and reset parliament, or if a new government were to adopt proactive policies like we’ve seen in other countries, such as the DRC and Zambia, we could rapidly turn things around. These nations, once giants in mining, revitalised their industries through policy reform, attracting substantial investment and boosting production. The potential for positive change is clear.
Alec Hogg: Thank you, Peter Major, for sharing your insights on the outcomes of the mining Indaba in Cape Town. It’s a crucial event for the global mining community. Peter serves as the director of mining at Modern Corporate Solutions, and I’m Alec Hogg from BizNews.com.
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