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Mining production increase, sales decrease

Two days after coming out of recession, South Africans have reason to smile again after Statistics South Africa said on Thursday that mining production increased by 0.9% year-on-year in July 2017.

The statistics indicated the largest positive contributors were manganese ore with 19.3%, chromium ore, which contributed 18.3%, diamonds with 16.5%, gold by 3.9% and other non metallic minerals contributed 17%.

Iron ore and platinum group metals (PGMs) each decreased by 5% and were significant negative contributors. Diamonds were the largest positive contributor while PGM’s were the largest negative contributor.

Mineral sales

According to Statistics South Africa, mineral sales decreased by 3.9% year-on-year in June 2017, with PGM sales dropping by -33.9%.

Gold went down by -14.6% and iron ore was down by -4.5%.

Managenese ore with 95.4% was the only positive contributor.

According to Nedbank’s Economic Unit, mining activity has rebounded, although moderately, from the low base in 2016. However, longer-term prospects remain less certain due to the difficult operating environment and policy uncertainty stemming mostly from business unfriendly signals from the Ministry of Mineral Resources.

“Mining production figures on their own have very little impact on the South African Reserve Bank’s monetary policy decisions. However they do matter in as far as they add to the country’s general growth outlook and the latest figures paint a less positive picture than those released for the second quarter,” commented Nedbank.

“While the latest gross domestic product (GDP) figures show that SA has emerged from recession, the outlook for the year as a whole still looks relatively poor. With falling inflation the SARB will probably continue on the interest rate cutting cycle that began in July. We forecast further 25 basis point cuts in September, January and March, followed by a flat profile into 2018.”

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