B Sonjica: Mining breakfast in Toronto

6 March 2007

Challenges facing the South African mining industry during the first two
decades of the 21st century

Master of Ceremonies
Distinguished ladies and gentlemen

I am deeply honoured to be given the opportunity here in Toronto this
morning to present the opening address at the eighth annual Mining Breakfast,
which also coincides with the 75th anniversary of the world famous Prospectors
and Developers Association of Canada Convention.

The Department of Minerals and Energy, which I lead, is responsible for
legislation with regards to issues of mining and energy. Whereas this is true
for the two legs of my portfolio, today I will confine myself to those issues
impacting on mining.

The exploitation of minerals laid the foundation for the development of the
modern South African economy. It was mainly on the back of such mining
activities that rapid growth in infrastructure occurred and emerging
manufacturing and financial services sectors flourished and supported the
growing mining industry during the first half of the 20th century.

Today, despite being succeeded by the manufacturing and services sectors in
terms of contribution to the South African Gross Domestic Product (GDP), our
mainstream mining industry still accounts for over 30% of the market
capitalisation on the Johannesburg Stock Exchange (JSE) and is characterised by
its high degree of technical expertise and the facility with which it is able
to mobilise capital for new ventures.

Ladies and gentlemen, South Africa's mineral wealth is legendary as many
speakers have testified in the past. Suffice it to say that we have the largest
resources in the world of platinum group metals (over 85 percent) chromium
(over 70 percent) manganese (80 percent) and gold (40 percent). We also
contribute significantly towards the global production of coal and iron ore, to
name but a few.

Gold, which was the main contributor to the revenue generated by the mineral
industry for over a century was recently replaced by platinum group metals as
the top revenue earner. In 2005 gold was displaced to third place in the income
stakes behind coal. Our currently exploitable gold resources are rapidly being
depleted as grades are falling and costs rising. Most of the remaining 40
percent lie at depths greater than 4 000 metres below the surface and are
presently too deep to mine. With the current high prices being fetched for
platinum, palladium and rhodium, the platinum group metal industry is very
buoyant and expanding very rapidly. Platinum group metals are today the new
stars of our mining industry.

We have recently entered a new millennium and if many analysts and market
watchers are to be believed at the same time a new bull phase in the commodity
cycle has commenced. It appears this is one that could last for a few decades,
if the main drivers of booming commodity prices, the exploding economies of
China and India, are anything to go by. It is therefore imperative for those of
us who live in the so called "developing world" to take full advantage of the
current boom in prices before the cycle reverses again.

In Africa, over the last five years or so, mineral commodities have become
the potential life blood that could finally bring economic growth and
development to many areas of the continent where poverty is a major problem
creating real wealth and as a spin off the prospect of social harmony in the
current strife torn areas.

Even in South Africa, current production rates are insufficient to meet the
tremendous increase in demand despite our longstanding history of mining and
well established infrastructure. To capitalise on the current boom we need to
invest significantly in increasing the output capacity of existing as well as
new mines. South Africa still has an abundance of the key mineral products
needed to sustain the rampant economic growth currently taking place in the
world and so not exploiting the current cycle of booming demand for mineral
commodities to the full will represent a major lost opportunity which the South
African economy can ill afford.

Going forward into the future, there are other key elements of our complex
mining industry of which not all will lie beyond our control or influence.
These will continue to present stakeholders with increasingly challenging
options.

To this end a comprehensive study which is expected to identify current and
potential challenges that could affect the industry's future sustainability is
being carried out.

Ladies and gentlemen, we the main stakeholders making up the South African
mining industry have committed ourselves towards pooling our resources to
ensure that we remain the mineral producing success story of Africa. We owe
this to all the people of our country as well as to all the investors, old and
new, that are counting on the industry's propensity to continue delivering
economic rewards.

We also have to fulfil our duty as an economic sector in conformity with the
Accelerated and Shared Growth Initiative for South Africa (AsgiSA) programme as
articulated by our Deputy President in 2005. This programme aims at attaining
an annual economic growth rate of 6% by 2009 and halving employment by
2014.

The Department of Minerals and Energy will, therefore, continue promoting
investment in unexploited or minimally exploited but economically viable
mineral deposits thus maintaining and enhancing our currently high global
competitiveness in mineral production and sales. Steps taken at state level to
ensure that mineral exploitation continues to play a major role in supporting
our economy will involve the Department of Minerals and Energy in co-operation
with other related government departments. The steps taken will include:

* maintaining ongoing macroeconomic stability
* advising on the need to maintain a fiscal environment that will always
encourage investment in the industry
* maintaining competitive energy prices.

We will also continue supporting research and development as well as
developments in mineral technology and the transfer of benefits arising from
these into the economy.

There is a very real need for assisting in mining promotion at three
separate levels, these being:

1. Large scale mining needs to be continually encouraged for this is the
level from which the major economic advantages for the economy will
accrue.
2. Junior mining needs to be welcomed and encouraged as these have proven
themselves to be extremely resourceful worldwide, pioneering many of the mining
projects currently being developed.
3. Small scale mining should also not be neglected especially in Africa. Often
stigmatised by its environmental degradation, artisanal mining can nevertheless
be a force for positive change if properly regulated. Promoting small scale
mining is an opportune way for kick-starting job creation and ancillary
economic activities in impoverished areas.

We will also ensure a high level of governance in the mineral and energy
sectors of our economy so as to secure safe and healthy working conditions in
mining and ensure a clean, healthy and unpolluted physical environment.

As many present in this audience today probably know, governance of the
South African mineral industry has always been built around free market
principles with government doing the regulating and law enforcement and the
private sector their own marketing and sales. Unfortunately, over the long
term, not all of South Africa's citizens have been able to receive their fair
share of the economic benefits or rewards emanating from the country's mining
sector. For some 100 years black people were prevented from participating fully
in the mainstream economy of the mining industry.

The legacy of apartheid and colonialism systematically excluded black
people, who form the majority of our population from meaningful participation
in the economy. Furthermore, this policy was entrenched through the actual
imposition of mining laws that specifically prevented black people from owning
or working in managerial positions in mining ventures except as menial and
lowly paid workers.

The above are some of the reasons that South Africa has taken a decision to
ensure the addressing of past imbalances takes place and that this will include
actively making it a point that women are empowered to not just work in the
mines, but become actual owners and thereby active role players in the
industry.

Since the advent of democratic government and a new Constitution in 1994,
therefore, after a phase of thorough policy revision once again involving full
consultation with all participants, our mineral legislation was completely
overhauled and re-constituted as the Mineral and Petroleum Resources
Development Act (MPRDA) of 2002 which came into force on 1 May 2004.

The new legislative framework has subsequently made significant strides
towards redressing the imbalances of the past. One of its products is the
Mining Charter, a document, ladies and gentlemen, espousing the cause of Black
Economic Empowerment (BEE) and which is founded on an accord reached between
government and the private mining sector.

Since 1996, 10 years of consistent economic growth has been recorded and
macroeconomic growth and monetary stabilisation have been achieved. With regard
to the introduction of the Mineral and Petroleum Resources Development Act
(MPRDA) and Mining Charter, I can report that existing mining operations have
not been disrupted and the Department has instead observed an increased
interest in exploration applications both from local and foreign investors.
Furthermore, the inclusion and participation of blacks has not disrupted the
economy and has instead contributed towards economic growth.

There has been much interest shown from all sides in how the Department of
Minerals and Energy is faring with the application process under the MPRDA. I
am pleased to report that we have, from the time of enforcement of the Act on 1
May 2004, received a total of 10 900 applications of which 94 percent of the
prospecting rights' licences, 62 percent of the mining rights' licences and 84
percent of the mining permits have been finalised. This means that the
Department is now successfully processing prospecting licences and mining
permits within the six month timeframe stipulated in the Act for completion and
inside the one year time allowed for the finalisation of mining rights.

The National Mining Promotion System (NMPS) forms an integral part of our
future goals for regulating the mining industry and as such represents a major
challenge for the Department. The first stage of a GIS-based cadastral system
set up to cater for the processing of licensing applications is up and running
and is already leading to much quicker turnaround times for the processing of
prospecting and mining applications.

Hence the period for processing mining rights in South Africa is not now
really any different from most other mining jurisdictions worldwide.

I have been informed that one of the delegates at the BEE seminar on
Saturday, 3 March, singled out a recent delay in the application process
tendered by one of his clients. The client was immediately contacted and
informed him that the application was actually finalised and his company
communicated with, which process he was able to verify with his colleagues. He
has since sent a sms apologising for his error. I have been asked by the
officials from the Department travelling with me to indicate to him that his
apology is accepted.

Recently we in South Africa have taken the processing of our minerals
further down the mineral value chain and the economic gain achieved over and
above exporting minerals in their primary form and even as refined metals has
for us become abundantly clear.

If we as a country are going to remain or grow in a competitive sense
internationally, therefore, where economically justified higher levels of value
addition to existing products is needed before exports occur: first of all to
primary minerals and secondly even to processed minerals where the opportunity
to exploit markets exists.

The African Mining Partnership is an outcome of the New Partnership for
Africa's Development (NEPAD) programme which was conceived at the Organisation
of African Unity (OAU) summit in Lusaka in 2001. Many African countries possess
abundant mineral resources such as: gold, copper, diamonds, oil and heavy
minerals. It therefore makes perfect sense for the African ministers
responsible for mining to get together and share experiences and expertise.

I have to emphasise that South Africa continues to be a good investment
destination because we have the competitive advantages of good infrastructure,
and long term expertise that has assisted with development and sourcing of the
necessary technology. We also have a legal and financial framework that speaks
to the needs of the investor. As our Minister of Finance has already alluded to
it, the issue of flow through shares is taken seriously by government as this
will help in further entrenching the best environment for investors.

Before closing my presentation here today, I would like to challenge all
major stakeholders to share responsibility for the developments that will
affect the future of our mining industry. The principles of private enterprise
within a free market have allowed the South African mineral industry to develop
and flourish without undue state intervention for well over a century, and
furthermore, it is certainly not our intention in government to subvert these
principles. Our industry is part of a worldwide interaction of intensely
competitive economic activities revolving around supply, demand and consumptive
behaviour affecting a broad range of mineral commodities. In how we react to
global developments in concert will determine whether we stand to gain or fall
together.

Ladies and gentlemen, I thank you very much for allowing me to address you
here today.

Issued by: Department of Minerals and Energy
6 March 2007