THE BENEFICIATION STRATEGY FOR THE MINERALS INDUSTRY OF SOUTH AFRICA

1. THE BENEFICIATION STRATEGY FOR THE MINERALS INDUSTRY OF SOUTH AFRICA PRESENTATION TO PPC ON MINERALS RESOURCES 26 July 2011

2. PRESENTATION OUTLINE • Basis for Mineral Beneficiation • Broad Vision • Beneficiation Value Proposition • Strategy Development Path • Global Economic Perspective • South Africa’s Comparative Advantage • Strategy framework

3. PRESENTATION OUTLINE (Cont...) • Cross Cutting Constraints and Interventions • Pilot commodity value chains • Concluding remarks

4. BASIS FOR MINERAL BENEFICIATION White Paper: The Reconstruction and Development Programme (November 1994) “Mining and minerals products contribute three-quarters of our exports and the industry employs three-quarters of a million workers, but this could be much higher if our raw materials were processed into intermediate and finished products before export. Our RDP must attempt to increase the level of mineral beneficiation through appropriate incentives and disincentives in order to increase employment and add more value to our natural resources before export. Moreover, this policy should provide more appropriate inputs for manufacturing in South Africa.”

5. BASIS FOR MINERAL BENEFICIATION White Paper: A Minerals and Mining Policy for South Africa (October 1998) “The aim of the policy will be to develop South Africa’s mineral wealth to its full potential and to the maximum benefit of the entire population. Government, therefore, will promote the establishment of secondary and tertiary mineral-based industries aimed at adding maximum value to raw materials.” Section 26, MPRDA, 2002 The Minister may initiate or prescribe levels of beneficiation of minerals in the Republic

6. BASIS FOR MINERAL BENEFICIATION • THE NEW GROWTH PATH • Sets a target of creating 5 million jobs in 10 years • Identifies structural challenges that impede desired growth rates, including • Logistics, energy infrastructure and skills, which raise costs • Economic concentration and price collusion in key parts of the economy, which raise costs and limit innovation and new enterprise development • An uncompetitive currency that limits employment growth in manufacturing, mining, etc. • A persistent balance-of-trade deficit funded with short-term capital flows attracted largely at high interest by international standards • Seeks to place the economy on a production-led trajectory with growth targeted in 10 ‘job drivers’, including, inter alia: • The mining value chain, with a particular emphasis on mineral beneficiation as well as on increasing the rate of mineral extraction

7. BROAD VISION • Increase a ratio of beneficiation extent to mineral production and increase export revenue • Facilitate economic diversification • Expedite progress towards a knowledge based economy • Create opportunities for new enterprise development • Contribute to creation of decent jobs and poverty alleviation

8. BENEFICIATION VALUE PROPOSITION Source: DMR

9. BENEFICIATION VALUE PROPOSITION (Cont...)

10. STRATEGY DEVELOPMENT PATH • An initial research study (DMR/MINTEK) • Selection of pilot commodity value-chains informed by areas of greater opportunity • A draft beneficiation strategy • Dedicated task team (inter-departmental) – DMR, DTI, DST, NT, DPE, Presidency • External stakeholder consultation • Approval of strategy by Cabinet

11. GLOBAL ECONOMIC PERSPECTIVE • The world has entered into a new growth phase led by developing economies • This growth will result in increased demand of mineral commodities such as iron ore for infrastructure development, consumer products etc. • Main markets for South Africa’s beneficiated goods will therefore come from these developing economies

12. SOUTH AFRICA’S COMPARATIVE ADVANTAGE In-Situ value conservatively estimated at US$ 2.5 Trillion, excluding energy commodities (coal, uranium, thorium)

13. STRATEGY FRAMEWORK COMPARATIVE ADVANTAGE MINERAL RESOURCES RESERVOIR [IN SITU VALUATION OF US$2.5 Trillion (Non-energy)] • COMPETITIVE ADVANTAGE • (Strategy Pillars) • Legislative Framework • (MPRDA, DAA etc.) • Multi stakeholder forums (e.g. Platinum Beneficiation Committee) • International trade agreements • Beneficiation strategic interventions BENEFICIATION STRATEGY PROVIDES A FRAMEWORK TO TRANSLATE COMPARATIVE ADVANTAGE

15. PILOT COMMODITY VALUE CHAINS • 10 minerals for 5 value chains • Energy commodities • Iron and steel • Pigment and titanium metal production • Autocatalytic converters and diesel particulate • Jewellery fabrication

16. PILOT COMMODITY VALUE CHAINS (ENERGY) • Energy vital to any industrialisation process security of energy supply is of the utmost importance • Main energy commodities are Coal Uranium and Thorium • Value chain interventions: • Quantification of the country’s uranium and thorium reserves • Support for R&D into alternative and future energy sources (e.g. Fuel cells)

17. PILOT COMMODITY VALUE CHAINS (IRON AND STEEL) • Steel products are vital inputs into labour intensive manufacturing processes but anti-competitive pricing is a major constraint to growth • Value chain interventions: • Invoke regulatory provisions to ensure sustainable and developmentally priced input commodities • Encourage investment into the South African steel industry to break prevailing anti-competitive behaviour by competitors

18. PILOT COMMODITY VALUE CHAINS (PIGMENT AND TITANIUM METAL) • This value chain is a potential key growth area for the country as increasing levels of urbanisation are expected to underpin demand for Ti-mineral concentrates for pigment and aerospace component manufacture • Value chain interventions: • Investigation into the viability of establishing a chlorine plant in conjunction with a pigment plant • The development of a more cost effective primary titanium metal production

19. PILOT COMMODITY VALUE CHAINS (AUTOCATALYTIC CONVETERS) • South Africa accounts for 1 in 10 autocats. produced globally and tightening emissions legislation will underpin future growth in this sector • Value chain interventions: • Invoke provisions of the law to ensure security of PGM supply • Development of metal access mechanism • Unlock the intrinsic value within the PGM sector

20. PILOT COMMODITY VALUE CHAINS (JEWELLERY FABRICATION) • South Africa is the land of gold, platinum and diamonds and jewellery fabrication is another labour intensive value chain that will beneficiate these minerals • Value chain interventions: • Establishment of a metal advance scheme • Promotion of existing incentives in the jewellery sector

21. WAY FORWARD • Development of implementation plans for the five pilot commodity chains • Implementation plans for other value chains to be developed thereafter

22. CONCLUDING REMARKS • Strategy provides coordinated approach to beneficiation • Provides a leverage for RSA to become globally competitive and optimise mineral resources rent • Fast tracks the country’s economic growth to tackle the challenges of development • Compliments the NIPF (IPAP) and the NGP • Provides the basis to invoke provisions of s26 of MPRDA to enable security mineral supply • The strategy is therefore, not a blueprint for individual commodity value chains, but provides a framework within which value chain specific interventions will be anchored.

23. ENDS..... Alive with possibilities…..