Mercado Released [15 June 2015]:MINING PRODUCTION & MINERAL SALES

Total mineral sales including gold decreased by 1.1% YoY from R33.3 billion to R32.9 billion. Excluding gold, the mineral sales decreased by R0.6 billion (2.1%) to R28.6 billion. Major negative contributors to sales were iron ore, coal, non-metallic minerals and manganese ore, which contributed -6.9%, -1.5%, -1.2% and -0.8%, respectively to the total mineral sales. However, there are some tailwinds coming from iron ore restocking in China and iron ore miners such as Kumba Iron Ore, BHP Billiton, Anglo American and Rio Tinto will benefit. Total mineral production including gold increased by 7.7% YoY and excluding gold increased by 11.2% YoY in April 2015. Major drivers for the increase was production in the PGMs and manganese ore. These minerals contributed 81.6% and 12.6% YoY, respectively. High increases recorded in the PGMs was because of the low base in April 2014 when the sector was heavily hit by five-month strike in 2014. Gold production decreased by 9.1% YoY. Our view is that there will be more pressure on gold production driven by the upcoming wage negotiations, which is kicking off in the next two weeks. Iron ore production increased by 5.2%, which is in line with 7.4% Q1 2015 increase in production for Kumba Iron Ore. Coal production was down 3.9% YoY in April 2015 and R8.4 billion was realised in March 2015 from coal sales. 62% of South Africa coal production is used for electricity generation. More headwinds from electricity supply cuts, subdued commodity prices and cuts in capital expenditures are going to affect mineral production going forward.

Week 25 2015