Muloni Downplays Need For Mineral Development Authority

A request by Uganda Chamber of Miners and Petroleum (UCMP) to have the government set up a Minerals Development Authority is certain to hit a dead end after Eng. Irene Muloni, the minister of energy and mineral development told Earthfinds that this will be duplication of roles now being undertaken by the line ministry.

Elly Karuhanga, the chairperson of UCMP Council while speaking at the closing of the 8th Annual Mineral Wealth Conference at Kampala Serena Hotel, in the presence of Eng. Muloni and Edward Ssekandi, the vice president of Uganda, requested that the two government officials spearhead the formulation of an Authority that will oversee the minerals sector.

According to Karuhanga, the mining sector is not getting the deserved attention from the government, unlike other sectors. “Why do we have just a unit? What has stopped us from having a mineral development authority? If we had an Authority, the attention (to offer licenses) would be taken away from minister,” Karuhanga said inquisitively. 

Among the issues the Authority should handle, according to Karuhanga, is the issuance of licenses, now a preserve of the minister through the Directorate of Geological Survey and Mines (DGSM) in Entebbe. He added that the Authority should also be the regulator of the mining sector.

However in an interview with Earthfinds, just after the closure of the two-day conference, the energy minister said this will not be possible because the government is focused on setting up a national mining company, which itself was requested for by the Chamber to protect the country’s business interests in the minerals sector.

“In the draft law, we are looking at a mining company; that is what they requested earlier on at the same mining conference (Ed. the 7th annual mineral wealth conference of 2018). They have been saying why don't we put in place a mining company so that it is also able to participate in the mining sector tells,” Muloni said.

The minister emphasized that with the coming into existence of an online licensing system, putting in place an Authority will duplicate roles and present a cost burden to run that Authority.

“If you are looking at an Authority for regulation that means you have to provide for it. Recently, you heard, the government was trying to rationalize by merging some of these Authorities because a lot of money is put in there,” she said.

"We will try to minimize expenses by putting in place structures that are able to manage the sector effectively. And now that we have gone online, the systems are going to control and manage the whole mechanism," she added.

She explained that the minerals unit at DGSM takes up the responsibility of supervising the mining sector – to follow up and monitor what the investors are carrying out and if they are they doing it in accordance with the licensing condition.

Unfazed, Karuhanga said they are seeking to meet the cabinet to have the matter addressed.

The conference held under the theme ‘creating an enabling environment for mining in Uganda’ attracted local and international members of the private sector, policymakers and members of civil society.

Miners Want Fast Paced Sector Reforms

The government of Uganda must expedite legal reforms in the mining sector to enable investors do business, speakers said at the 8th Annual Mineral Wealth Conference sitting Thursday at Kampala Serena.

Andy Spiro, the country manager Great Rift Geosciences SMC Ltd, said that in order to attract investment ‘we need good and fiscal policies that are competitive’ adding that good laws will mitigate the risks in the sector.

Similarly, Dr. Luisa Moreno, the managing director Tahuti Global Inc, said favorable mining laws is what Uganda needs to attract investment. Dr Moreno also suggests that the sector should be looked at as a exploration sector not as a mining sector yet.

Dr. Elly Karuhanga, the chairperson, Uganda Chamber of Mines and Petroleum (UCMP), emphasized the need for Uganda to work towards creating an enabling environment for the mining sector.

These submissions from the private sector members who are too anxious to deploy their money into exploration and mining activities are coming at a time government has committed to revise the mining laws, regulations and policies.

Last year, a mining and minerals policy was put in place. Government with stakeholders in the private sector and civil society are participating in an ongoing review of the mining law and regulation that will phase out the Mining Act of 2003 and 2004 regulations.

Peter Lokeris, the energy minister in charge of minerals, explained that the new legal and regulatory framework shall unlock the mineral sector to spark transformation.

He noted that the sector has undergone through various transformations under Mining Act of 2003 that has been in force for the past 15 years.

Robert Kasande the permanent secretary of Ministry of Energy and Mineral Development stated that government intends to conclude the new legal and regulatory framework reviews as soon as possible.  

To facilitate mining activities in the country, the energy ministry is looking at putting in place an online licensing system, establishing a mineral certification system and online registration of all miners (especially artisanal miners) among other programs.  

United Nations Development Programme (UNDP) Uganda country representative Elsie Attafuah acknowledged that that sustainable development in the mining sector must benefit all men and women.

The 8th Annual Mineral Wealth Conference, organized by UCMP, is a high private sector led gathering that sits to deliberate on how Uganda can develop its mining sector.

This year’s theme of the two day conference is creating an enabling environment for mining in Uganda.

Miners Hoping EITI Will Be Good For Business, Promote Transparency

Uganda’s pursuit of becoming a member of the Extractive Industries Transparency Initiative (EITI) took shape with the formation of the Multi Stakeholder Group (MSG) to expedite the application process.

The Multi Stakeholder Group membership consists of officials from the Ministry of Finance, Planning and Economic Development (MOFPED), Civil Society Organization (CSOs), private sector, international oil and mining companies and representatives of Artisanal and Small Scale Miners (ASMs).

The pending arrival of EITI has caused excitement in the country’s mining sector which is predominantly artisanal, rudimentary and has been characterized by lack of transparency and accountability especially in instances where the government has entered into big money contracts with foreign mining companies.

Saul Ongaria, a senior economist at MOFPED, recently speaking at the Citizens Convention on Mining organized by Global Rights Alert (GRA) and partners at Hotel Africana, revealed that Uganda’s application to become a member of EITI will be submitted before the end of this year.

Uganda becoming a member of EITI comes with a number of benefits top of which is the need to promote transparency, good governance and accountability in the sector by both miners and government who must declare details of contracts, transactions and taxes exchanged and how they are used to develop the country.

Ongaria told miners and stakeholders at the convention that joining EITI will help Uganda improve her investment climate for miners, generate more revenue for the government, minimize revenue mismanagement, improve the licensing process which has been contentious and provide a platform for sharing of factual sector information.

Government Committed

He said the government is committed to achieving this and is benchmarking with countries that are currently implementing and practising these EITI standards.

“Government has put in place laws and policies to facilitate this process,” he said referring to the Public Information Management Act, the Access to Information Act, the National Oil and Gas Policy, the Mining and Minerals Policy and others.

“We are going to make sure that the law works in harmony with extractives processes. We need it (EITI). It is a standard that will help us track the sector. EITI requires cooperation between CSOs, companies and government to agree on the way forward and flag whatever gaps are in the sector and also offer recommendations,” Ongaria explained.

While Ongaria painted a picture of commitment, the chairperson local council five Mubende district Kibuuka Francis Bazigatirawo Amooti tasked government to fast track registration of miners in the country so that they can participate in the EITI implementation.

“The promise has always been there – applying – when will this applying stop? Does it require the signature of the Pope in Rome?” Kibuuka, who re-echoed the opinions of many artisanal miners at the convention, wondered.

Artisanal miners must participate

The convention, which attracted close to 400 stakeholders in the Ugandan mining sector, heard from Ian Mwiinga, the national coordinator of EITI Zambia, that artisanal miners through their associations must participate in the EITI application and implementing processes.

“Make sure you have a stake, no one should block you,” he encouraged the miners who were in attendance, explaining that Uganda’s focus should be what EITI will do for the country but not what Uganda will do for EITI.

In agreement, Ongaria acknowledged that it is challenging to solve issues without involving the affected people, in this case, the artisanal miners. “We want ASMs to be part of the MSG. There are issues you can raise and we pick them up. We are going to ask you to nominate representatives to MSG,” Ongaria noted.

James Muhindo of Advocates Coalition for Development and Environment (ACODE) stated that ASMs will be obligated to participate and adhere to the standards of EITI once Uganda signs to it.

“It will be an obligation for ASMs to declare what they are producing once they are in the system. Whatever the companies declare, they will also have to declare. It will be their responsibilities to declare.”  

Capacity challenges for artisanal miners

EITI, implemented in over 50 countries, especially in Africa because the continent is rich with natural resources, faces implementation challenges like lack of good laws and willingness by both government and miners to go all the way in implementing it.

Paul Bagabo of Natural Resource Governance Institute noted that that ASMs are largely challenged by lack of capacity and because of that gap the government prefers to work with big companies. He asked ASMs to start coming together and work towards becoming one big company.

He advised Uganda to focus on the implementation of EITI and combat corruption in the extractives by protecting civic space.

The annual Citizens Convention on Mining was held under the theme amplifying citizens’ voices, harnessing mineral wealth opportunities for Uganda with support from ACODE, Actionaid International, Transparency International and Ministry of Energy and Mineral Development.

Miners Decry Continued Harassment By Police Mineral Protection Unit

Artisanal and Small Scale Miners (ASMs) across the country are having a hard time working with the Police Mineral Protection Unit because police officers have turned to criminal acts instead of sanitizing the mining trade.

Miners from western Uganda districts of Buhweju, Kisoro and Busia in eastern Uganda on Thursday told the 3rd Annual Citizens’ Convention on Mining at Hotel Africana in Kampala that some police officers have made it a habit to disrupt their operations.  

Officers of the Police Mineral Protection Unit formed in 2017 to deter illegal mining and crime in the minerals sector has according to accusations made by miners involved themselves in mining activities, aided illegal mining or extorted money from miners.

Nabulindo Jane Kwoba, the Woman Member of Parliament for Busia District, speaking at the citizen convention convened by Global Rights Alerts and partners said police has been joined by soldiers of Uganda People’s Defense Forces (UPDF) to chase miners from their land.

“They never listen to anybody. They are chasing my people from their land,” the politician told the convention.

An ASMs leader from Kisoro revealed that police officers are working with foreigners in Kisoro to mine wolfram at the expense of local artisanal miners.

Similar complaints were raised by gold miners in Buhweju districts where the Police Mineral Protection Unit is said to have periodically arrested miners and disrupted meetings of miners with civil society organizations.

The heated accusations put the commandant of the Police Mineral Protection Unit ASP Moses Musinguzi Karakire in a tight spot and to bravely defend the unit in face of irate miners who have suffered at the hand of the unit.

Musinguzi who denied his unit ever engaging in dubious deals advised miners to report the implicated officers to the Uganda Police Professional Standards Unit so that the culprits are apprehended and punished.

“When such mistakes happen, blame the individual but not the institution. We have to work with all people because we are a people police,” said Musinguzi.

“Some people are using equipment that is not expected to be used by a holder of a particular license. Where police go and find a crime being committed, he or she has to stop it,” added Musinguzi.

Responding to the issue of disrupting meetings in Buhweju, Musinguzi said they had gone to the area to sensitize miners but instead the miners ran away from police.

"We went to Buhweju to sensitize and give information on both TV and Radio but when people heard that we were coming, we found they had disserted the mines but we still looked for them and sensitized them," Musinguzi explained.

Asked why police sometimes act parallel and unresponsive to the ministry of energy and mineral development, Vincent Kedi, the principal engineer for mining at the department of geological survey and mines, acknowledged that there is a disconnection between the two and challenges in reporting to authorities.

Earlier, the minister for minerals Peter Lokeris had reiterated government’s commitment to help ASMs by putting in place an enabling environment for ASM operations and ensure that both our local people and the country at large, derive the most optimal benefits from mining.

“The government of Uganda recognizes the potential that ASM can contribute to the local economic development if well regulated. ASM can play a significant role in providing employment especially in rural areas, improving the livelihood of people directly or indirectly and controlling rural to urban migration,” Lokeris said in his address.

The convention was organized by Global Rights Alert (GRA), Action Aid International Uganda, Transparency International Uganda (TIU), Advocates Coalition for Development and Environment (ACODE), Uganda Association of Artisanal and Small Scale Miners (UGAASM)and the Ministry of Energy and Mineral Development (MEMD).

This theme for the two-day convention was “Amplifying citizens’ voices, harnessing mineral wealth opportunities for Uganda”. It attracted ASMs from different parts of the country, MEMD officials, Civil Society Organizations, district officials and investors.

Chamber Makes Demands Ahead Of Mining Conference

The Uganda Chamber of Mines and Petroleum (UCMP) is going into the 8th Annual Mineral Wealth Conference scheduled for 2nd to 3rd October at the Serena Kampala Hotel with demands tabled before the government.

UCMP, a private sector-led lobby group for the extractives sector in Uganda, has been critical of the government’s sluggish approach when addressing issues to do with mining in the country.

Uganda, endowed with close to 50 profitable mineral types, barely earns from the mineral resources because the government has not really made it conducive to attract moneyed investors into the country to explore, mine and trade.

And for that matter, UCMP is asking government to ensure that there is a conducive environment that can entice investors to invest in Uganda’s mining sector ‘whose performance towards the Gross Domestic Product is still very low.’

"As a country, we are still losing billions of money because the majority of the players are still artisanal miners. This has impacted big towards the development of the sector which has the potential to contribute significantly to Uganda’s economy," UMCP Council Chairman Dr Elly Karuhanga told a media briefing on Monday

"One mine in Uganda has got $16bn sitting down there. The GDP of Uganda is worth $28bn. Do you think that mining in Uganda is significant or not? One mine in Uganda is capable of changing the entire economy," he noted.

"Kilembe mines alone used to contribute 30% of the country's GDP. I like to repeat this because I think 30% is quite a lot to come from one company," he added. 

Richard Kaijuka, chairman Board of Trustees at UCMP said Uganda has not done a lot of exploration as a country to actually establish what minerals the country has.

"Uganda is next to DRC, which is known as a mining destination. This gives Uganda a chance to have minerals that maybe on high demand in the near future," Kaijuka said.

"As a youngster, I was a bank manager in Kilembe. Kilembe was employing about 4, 000 people. Ugandans don’t understand the impact that mining can have on this nation,” Kaijuka added.

Frank Mugyenyi, a representative of the African Union advised that while Uganda has been mining and selling minerals, it can now go further and actually add value to these minerals.

The theme for the this year's Mineral wealth conference will be, "Creating an Enabling Environment for Mining in Uganda"

Government Tasked To Enforce Laws Barring Child Miners

By George B. Niyonzima  

There is need for collective responsibility among stakeholders to curb child labour within the mining sector in Moroto district, Emmanuel Tebanyang, the Policy Analyst of Karamoja Development Forum (KDF), recently told tourists on a study tour in the area.

Tebanyanga says that government needs to enforce existing laws and also speed up formulating bylaws in the mining districts, especially Moroto, to reduce child labour.

He reveals that demand for children to work in the mines has seen toddlers not go to school. Children as young as seven years are employed in the mines, reports say.

He further disclosed that in areas where elementary mining is being done, children are engaged in hard labour activities for a small commissions.

This mostly happens in limestone quarrying sites in some sub counties of Moroto district.

Tebanyang said in the sub-counties of Katikekile and Tapac where Tororo Cement gets its limestone, children toil beyond their age and physical limits.

“Unfortunately this has not translated into wealth for the abused children,” he said.

He further told journalists who were on a study tour organized by African Centre for Media Excellence (ACME) that there is need to involve all stakeholders to reduce child labour in the mining industry.

Apollo Dan Majory, the sub county Chairperson of Rupa, while meeting the journalists at the sub county headquarters said that the sub county has managed to put bylaws to prevent children from working in the mines.

According to Majory, when a child is caught working in the mines, his or her parents are arrested and sentenced for community service.

“However much we have put bylaws as sub-county, we still have problem of enforcement. Because of this enforcement gap, some children have gone back to the work in the mines,” Majory revealed.

Majory called out his peers in the sub county to work together as a unit and share information to better position themselves in fighting against child labour in Rupa sub county and Moroto district at large.

David. A. Omido, the Logistics and Utility Manager at Tororo Cement, refuted accusations that the cement manufacturer employees kids in the limestone mines.

He rather claimed that parents employed by the company come with children in the mines. He said the children are made to sleep in the mines but don’t work.

Omido divulged that Tororo Cement is doing a feasibility study to inform its final investment of constructing a cement factory in Moroto district.

“We are still seeking to understand whether the available limestone deposits are enough and of good quality to sustain cement the factory.” Omido narrated.

Energy Ministry Stops Hard-Copy Applications For Mineral Rights

The energy ministry has said they have stopped receiving over the counter applications for mineral rights until the online application opens on August 30, 2019.

This is under the programme to upgrade the country’s Mining Cadastre and Registry System (MCRS) to an e-government based mineral licensing system

In a statement, Robert Kasande, the Ministry of Energy Permanent Secretary said that from 12-29, August 2019, the government will not receive any mineral right application on the counter as it prepares for the online mineral applications and licensing system.

The online system was launched early this year but could not start as the ministry made preparations for its official start this month. The system will also see the particulars of artisanal miners captured into the online register.

The artisanal miners would be registered under the Biometric Registration of Artisanal and Small Scale Miners Project (BRASM).

According to Kasande, through the online system, companies and individuals will be able to submit applications online, undertake all other business processes online and view the status of their application in real-time. The system is expected to cut on the paper clutter, reduce on incidences of corruption and cases of lost applications.

“The online mineral licensing system is expected to improve transparency and increase the accessibility of information, boost productivity, eliminate bureaucracy, reduce on the time taken to process applications for minerals rights,” Kasande said in a statement.

Mercury Continues To Eat Into Health Of Gold Miners

Gold is possibly the most mined mineral in Uganda. Even with the monetary value attached to it, it remains a rudimentary adventure for artisanal miners with little or no large scale gold mining currently ongoing.

The government carried out an airborne geophysical survey and geological mapping to identify areas with minerals including gold, only Karamoja missed the exercise because of insecurity, but no high profile company has been able to venture into large scale gold mining.

According to Africa Centre for Energy and Mineral Policy (ACEMP), the places most known for gold mining in Uganda albeit rudimentarily are Mubende (Kitumbi, Kayonza gold fields), Namayingo gold fields on the shores of Lake Victoria in Eastern Uganda, the Buhweju gold fields in Western Uganda and Karamoja.

Artisanal And Small Scale Gold Mining (ASGM) in Uganda is highly informal with no high tech exploration but rather discoveries are made by ‘barefoot geologists and sniffer dogs.’

The challenges of the artisanal miners are varied but one that stands out and has proven to be fatal is the continued use of two hazardous chemicals to hasten the process of extracting gold and separating it from the soils. These chemicals are mercury and cyanide. They are also hazardous to the environment.

EFFECTS OF MERCURY/HEALTH RISKS

World Health Organisation (WHO) says that mercury is toxic to the central and peripheral nervous systems. The inhalation of mercury vapour can produce harmful effects on the nervous, digestive and immune systems, lungs and kidneys, and may be fatal. The inorganic salts of mercury are corrosive to the skin, eyes and gastrointestinal tract, and may induce kidney toxicity if ingested.

But even with these health dangers, and according to Mr. Don Bwesigye Binyina, the Executive Director of ACEMP, no specific laws are regulating the use of mercury in Uganda. He says the Mining Policy 2001, the Mining Act 2003 and the Mining Regulations of 2004 are silent on the use of mercury.

LAWS SILENT ON MERCURY USE

He explained that part six of the Mining Act, 2003 addresses the protection of the environment in mining operations but puts that responsibility into the hands of the holder of an exploration licence or mining lease who must carry out an environment impact assessment of his or her proposed operations in accordance with the provisions of the National Environment Act, Cap 153.

“Unfortunately, this requirement is only for holders of exploration licences and mining leases and does not cover holders of location licences who are predominantly small-scale miners applying mercury and cyanide in largely gold ore tailings to enhance their production,” Mr. Binyina stated. 

While most of artisanal gold miners are illegal, unlicensed and not regulated, Mr. Binyina reveals that there is a steady increase in the number of small-scale gold miners holding location licences and applying mercury and cyanide in gold extraction.

To avert this, the Mining and Minerals Policy 2018 proposes the organization and legislation of artisanal and small-scale mining operations and management of occupational health, safety and environment with special attention to mercury use in gold extraction in the ASGM sub-sector.

The policy also establishes a mechanism to monitor and enforce compliance to health, safety and with this policy, government seeks to promote the use of environmentally sound exploration and mining techniques and technology and to regulate the use of toxic and hazardous substances such as mercury and cyanide.

A revised national environment law has been aligned with the new mining policy framework to promote sound management of chemicals and products to protect human health and the environment.

Also, National Environment Management Authority (NEMA) is charged with engaging the Directorate of Geological Surveys and Mines (DGSM) to establish criteria for the classification of hazardous chemicals and products containing hazardous chemicals in accordance with the hazards they present to human health and the environment.

The law also provides for the monitoring water bodies, soils or any other receiving environment for any spill of hazardous chemicals and contamination; and monitoring of the effect of hazardous chemicals and their residue on human health and the environment.

MERCURY SOURCE AND TRADE

A study by ACEP on mercury importation reveals that informal in-country trade flows becoming increasingly evident. "Interviews from mercury trade statistics indicate that South Africa and Kenya are the principal source countries, although Malaysia appears to have dominated official mercury imports over the past two years.

According to the Uganda Revenue Authority (URA), eight consignments totalling 615 kg entered the country between January 2013 and February 2016, mostly from Kenya, as stated in official records. A representative of the URA emphasized that smuggling is likely to be rampant given the apparent lack of logistical and regulatory constraints," ACEMP said.

The leading actors in the mercury value chain are foreign traders from Kenya, Tanzania and DR Cong or sell local trader who takes it mining sites. The local trader according to ACEMP are also gold buyers who supply it to miners. Chinese mining companies and jewellery shops owned by Asian also trade mercury.

Malaba and Busia border posts on Uganda’s eastern border and Mutukula on the Southern border with Tanzania, are the major country's entry points for smuggled mercury. Uganda has also been reported to be a transit country for a mercury trade route feeding into the Democratic Republic of Congo (DRC).

THE CASE OF CYANIDE

Alongside mercury, cyanide was another preferred deadly chemical to extract gold but ACEMP says many operators are abandoning their cyanide plants due to the high operating costs while others do not operate at full capacity.

An interview by ACEMP with an operator of a CIP plant in Kasanda reveals on average one needs around Shs6.7 m daily to sustain a commercial CIP. Average ore grade of 3g/tonne would cost approximately Shs160m to produce 1.5 Kg of gold valued at approximately Shs200m living a meagre profit margin of Shs40 million in month.

However close to mother load ore grades of 5grams - 55 grams per tonne  could cost less than Shs40 m to produce between 1-5 kilograms in a week, but hastens to add that these ore grades are a rare occurrence. This largely explains the struggle by majority of ASMs to sustain such a capital intensive technology

In conclusion, ACEMP believes that reduction in mercury use will be more possible with inclusive cooperation and more business support in ASGM supply chains rather than hard policing and enforcement. Primary barriers to mercury reduction are driven by the cost of business for ASGM groups and buyers.

This means that the cost burden for shifting to hg free ASGM methods cannot be left entirely to these two groups. NAP strategies have to allow for testing, developing and incentivizing alternative options to mercury.

M2 Cobalt, Jervois Mining Ugandan Merger Okayed By Shareholders

Prospects of a merger between Canadian mining firm M2 Cobalt and Jervois Mining of Australia got a boost after shareholders gave the deal the much needed green lights.

This development will Jervois Mining what has been called a transformational foothold in Uganda’s Kilembe mines. When all formalities are completed Jervois will now acquire all of M2 Cobalt’s outstanding shares – issuing M2 Cobalt holders one Jervois share for every M2 Cobalt share held.

Jervois anticipates the transaction will be finalised this week, with the merged entity to trade as JRV on both the ASX and TSXV. The merger precedes a separate previously highlighted deal with eCobalt Solutions, which is expected to go through in July.

Once both mergers are complete, Jervois will be the world’s third largest cobalt company with a market cap of US$100 million. Jervois shareholders will own 40% of the combined entity, with M2 Cobalt holders possessing 11.4% and eCobalt 47%.

The combined entity will own numerous cobalt, nickel, copper and gold assets in Uganda, the US and Australia. eCobalt brings to the party its wholly-owned Idaho cobalt project in the US with a NI43-101 measured and indicated resource of 3.87 million tonnes at 0.59% cobalt and 0.85% copper. The deposit is open along strike and at depth.

Investors Unimpressed With World's Top Miners Performance

Revenue up 8% to $683 billion; EBITDA up 4% to $165 billion; Record dividend paid to shareholders of $43 billion up 13% ;Market capitalisation of the Top 40 down 18% to $757 billion, 31 Dec 2018 with partial recovery thereafter.

The world's 40 largest mining companies continued to consolidate their stellar performance of the past several years by delivering steady growth in 2018 according to PwC's Mine 2019 report released today.

As a group, the Top 40 increased revenue by 8%, buoyed by higher commodity prices and marginally improved production. They also boosted cash flows, paid down debt and provided a record dividend to shareholders of $43 billion.  Forecasts indicate continued steady performance in 2019. Revenue should remain stable, with weaker prices for coal and copper offsetting marginally higher production and higher average prices for iron ore.

Yet investors seemed unimpressed by the Top 40's result, judging by market valuations, which fell 18% over 2018. While total market capitalization rose in the first term of this year, it remains 8% down compared to the end of 2017.  Over the past 15 years, total shareholders' return in mining has lagged that of the market as a whole as well as comparable industries such as oil and gas.

Michal Kotzé, PwC Africa Energy Utilities & Resources Leader says: "In spite of the strong operating performance of the world's top miners, there is still more room for improvement for mining to continue to create and realise value in a sustainable manner. Both investors and other stakeholders have concerns about the mining industry's ability to respond to the risk and uncertainties of a changing world.

"Globally, stakeholders are concerned that the industry is lagging when it comes to a number of factors that have not been a traditional focus of the mining industry. These include dealing with emissions, investing in differentiating technology and digitisation, engaging more proactively with consumers and building brand.

"The mining industry will have a window of opportunity to adapt to the growing and changing expectations of stakeholders. By utilising technology to operate safely and more efficiently, addressing global concerns, and maintaining a disciplined strategy to create ongoing value for its stakeholders, the industry can forge a better future for all beneficiaries of mining."

 A chance to fix brand mining

With strong balance sheets and cash flow, now is the time for the mining industry to address the issues weighing down market valuations. Climate change, technology and changing customer sentiment are among many of the business challenges.

In order to restore faith in 'brand mining', the top miners will need to prove they are keeping up with the pace of change. Miners have a critical role to play in addressing the awareness gap between the brand of mining and the benefits of mining.

Balance sheets remain strong; capital expenditure up but slow

In 2018 the Top 40 paid down $15.5 billion in net borrowings, resulting in the gearing position dropping below the 10-year average. All liquidity and solvency ratios improved during the year, leaving the world's largest miners with strong balance sheets and cash flows.

In line with expectations, capital expenditures started to rise again, albeit from historically low levels.  The 13% increase over the previous year to $57 billion suggests that miners are continuing to proceed cautiously; approximately half of the capital expenditure in 2018 was for ongoing projects.

Copper and gold dominated spending in 2018, attracting $30 billion of investment. Capital expenditure on coal was consistent, year on year, and we expect miners will maintain current production levels while the coal price remains high.

Shareholders, government and other stakeholders rewarded

An 11% lift in operating cash flows has allowed the Top 40 to increase shareholder distributions in 2018 to a record $43 billion. Dividend yield for the year was 5.5%. There was a notable jump in share buybacks to $15 billion, up from $4 billion in 2017. Rio Tinto and BHP accounted for 70% of the total activity returning proceeds of non-core disposals to shareholders.

In 2018 the share of value distributed to governments in the form of direct taxes and royalties   increased from 19% to 21%. Employees received 22% of the total value distribution from the Top 40. "Mining along with oil & gas, distributes a greater share of its value to governments than almost any other sector," adds Andries Rossouw, PwC Assurance Partner.

"A number of countries have also implemented carbon taxes and/or emissions trading schemes." Of 25 countries in which the Top 40 operate, 13 countries have already implemented these taxes/schemes and nine countries are actively considering implementation.

M&A activity picks up

After several years of sluggish activity, M&A picked up significantly in 2018. The value of announced transactions rose 137% to $30 billion, driven by a flurry of activity in the gold sector, the on-going push by miners to optimise their portfolios, and momentum to acquire energy metals projects.

Rossouw comments further: "This renewed appetite for large transactions looks as though it will continue throughout 2019, with the deal value announced to 30 April 2019 already surpassing the value of all the announced deals in 2017.

Gold sector consolidating

The gold sector is experiencing a renewed round of consolidation, driven by a shrinking pipeline of projects, fewer new high-grade discoveries and a lack of funding for junior developments. Gold deals increased from 8% of total Top 40 deal value in 2017 to 25% in 2018, and this year are tracking at close to 95% of deals as at the end of April.

"Gold mining companies need to be rigorous and disciplined with prospective deals. With substantially all the value generated by mergers and acquisitions between 2005 and 2012 now lost, investors are still reeling from past transactions where purchasers overpaid for assets," Kotzé comments.

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