News for the resources industry
Concerns, issues and opportunities in the resources sector
Venmyn Deloitte writes a fortnightly newsletter about issues that affect the resources community. Read more by clicking on the newsletters below or subscribe by mailing firstname.lastname@example.org
Metal accounting - the new focus area (Part 1)
Metal accounting is becoming an area of increasing focus due
to the requirement for the resulting data to feed directly into
financial reports. Metal accounting is vital to sound corporate
governance and to assist in this area of scrutiny, Venmyn
Deloitte designs a metal accounting process that identifies
the flow from the Mineral Resource and Mineral Reserve
through to saleable metal; detecting inconsistancies,
accounting errors, bias, variabilities, and inefficiencies; and
propose improvements to support accurate metal
accounting. Click here for more
Metal accounting downstream processes (Part 2)
Venmyn Deloitte believes that in the current depressed mining environment the importance of using accurate geological models to schedule mine production, and their influence on the mining, processing and the metal accounting facets, is often underestimated. It is this realisation that has prompted mining companies to go back to basics and review and improve the accuracy of their geological models. Consequently, Venmyn Deloitte considers it important to undertake an independent review of a mining company’s geological model, to validated and ensure the reliability and accuracy of the geological model and determine the impact it has on the downstream metal accounting process. Venmyn Deloitte believes that the first step in a proper metal accounting system commences with an accurate geological model. Click here for more
Converting Tailings Dumps into Mineral Resources
Extraction of valuable metals from tailings dumps (or residues or low grade stockpiles) traditionally regarded as waste, has long been researched by metallurgists. A number of developments in mineral processing technology have combined to make the retreatment of numerous tailings dumps a profitable proposition. This is particularly the case for tailings dumps created from the processing of platinum group elements (PGEs) from the UG2 reef in the Bushveld Complex (BC) of South Africa, which are now being retreated to recover chrome. Similarly, tailings dumps arising from the processing of chrome ore in the Lower Group reefs of the BC are also being retreated to recover PGEs. Several commercially profitable enterprises have also been set up with the sole intention of retreating tailings dumps arising from South Africa’s Witwatersrand gold processing operations. Click here for more.
Cash Generating Units: What should the size be?
The investment community and mining and oil and gas companies are at odds as to what the optimal size of a cash generating unit (CGU) should be and this may have an influence on whether impairments are made and how often these are made. Click here to read more
Update on liquidation of Messina Copper
The first creditors meeting of Messina Copper, the operating subsidiary of African Copper PLC, which owns the Mowana Mine, will take place on March 15, 2016, in Gaborone, following liquidation proceedings having started at the company. To find out more, contact provisional liquidator and Deloitte Botswana partner Max Marinelli on +26 77 160 3365 or Venmyn Deloitte director Chris de Vries on +27 79 481 9679 or read this March update on the liquidation. Click here for more
Distressed Mines : Brave decisions needed
The ongoing low commodity price environment has forced many mining companies into survival mode and is likely to continue to do so for some time. Click here for more.
Litigation on mineral valuations is likely to rise
It is likely that litigation matters against mineral companies that have overstated the value of their assets will increase in the coming months.
Click here for more.
Chinese Growth : What it means for mineral companies
Many mineral companies are carrying on mining despite receiving low prices and sometimes prices below the cost of production. Some are concerned that they may lose market share if they stop producing, some are just trying to cover as much of their fixed costs as possible, and some continue to be buoyed by a sense that China is still growing. Click here for more.
The impact of minerals and oil and gas on economies: A focus on Africa
African economies are having a torrid time as a result of the lack-lustre performance of various mineral commodities as well as the oil and gas sector. Many countries have explicitly mentioned the poor performance of these sectors as having contributed to reductions in GDP growth and this is particularly the case where these sectors have accounted for a large proportion of government revenue or exports. Click here for more.
Resources and Reserves: Which prices are being used in calculations?
Mineral commodity producers need to carefully assess the commodity prices at which their mineral resources and mineral reserves are being calculated.
This is the view of Venmyn Deloitte MD Andy Clay, who advocates that mineral resources be calculated using a price that is 50% higher than the spot price, while mineral reserves should be calculated using a price that is 10% to 20% below the spot price. Click here for more.
Investors beware! :Production costs should not be your only investment guide
Investors who are keen on investing in a particular commodity should not assume that, if a company’s cost of production is lower than the commodity price, it is a profitable venture. Click here for more.
Breach of Covenants: The possibility is increasing
It is understood that banks are aware that some mining companies may default on the debt covenants that accompanied loans that they have taken in the past. Click here for more.
Uranium Grades: The most important investment concern for uranium projects
So many uranium projects have closed or have performed poorly that one needs to ensure that the economic fundamentals, and most importantly the required grade, be in place before starting any uranium venture. Read Venmyn Deloitte MD Andy Clay's thoughts about grade in the uranium sector here
Update on the Nema Financial Provisioning Regulations
Deloitte is actively engaging with government and industry stakeholders in order to assess the impact of the Regulations and the latest developments on its clients’ businesses. Deloitte will continue to closely monitor developments and inform its clients accordingly. Click here for more