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UNCLAS SECTION 01 OF 05 PRETORIA 004103 
 
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SUBJECT: South Africa: Minerals and Energy Newsletter 
"THE ASSAY" - Issue 11A, November 1-15, 2007 
 
 
PRETORIA 00004103  001.2 OF 005 
 
 
This cable is not for Internet distribution. 
 
¶1. (U) Introduction:  The purpose of this newsletter, 
initiated in January 2004, is to highlight minerals and 
energy developments in South Africa.  This includes trade 
and investment as well as supply.  South Africa hosts 
world-class deposits of gold, diamonds, platinum group 
metals, chromium, zinc, titanium, vanadium, iron, 
manganese, antimony, vermiculite, zircon, alumino- 
silicates, fluorspar and phosphate rock, and is a major 
exporter of steam coal.  South Africa is also a leading 
producer and exporter of ferroalloys of chromium, 
vanadium, and manganese.  The information contained in 
the newsletters is based on public sources and does not 
reflect the views of the United States Government.  End 
introduction. 
 
--- 
Key 
--- 
 
¶2. (U) Key to some of the terminology and abbreviations 
used is given to facilitate understanding. 
 
BEE (Black Economic Empowerment) - the scheme whereby the 
South African Government promotes black participation in 
business. 
 
- t = tons, 
- t/d = tons per day, 
- c/l = cents per liter, 
- t/m = tons per month, 
- t/y = tons per year, 
- oz = troy ounces (31.1 grams), 
- cmg = centimeter grams, 
- mcf = million cubic feet, 
- tcf = trillion cubic feet, 
- R = SA currency (rand), 
- MW = megawatts, 
- kt = thousand tons, 
- bbl/d = barrels per day, 
- MW = megawatts, 
- PGM = platinum group metals. 
 
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HOT NEWS 
-------- 
 
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Zimbabwe's Indigenization Plans 
------------------------------- 
 
¶3. (SBU) The GOZ has posted in the Government Gazette the 
Mines and Minerals Amendment Bill designed to pass 
majority ownership of mines to indigenous (black) 
Zimbabweans.  Under the proposed Bill, the State must 
have a 25% non-contributory stake in any mining company 
engaged in the extraction of energy minerals, precious 
metals and precious stones, and a 26% paid-for interest 
in any company involved in the exploitation of these 
minerals.  The 26% will be paid for from dividends earned 
from the state's 25%. The Bill would also require that 
51% of any mining company engaged in the extraction of 
these or any other mineral be made available for 
acquisition by the State or indigenous Zimbabweans.  It 
also specifies the timeframe within which existing and 
future mining companies must achieve the ownership 
thresholds, with existing companies allowed more time 
than new companies.  The Bill justifies its "seizure" by 
"virtue of its original ownership of all useful minerals 
in its subsoil".  The Bill still has to be debated in 
Parliament. 
 
¶4. (SBU) The Mines Amendment Bill follows hot on the 
heels of the Indigenization and Economic Empowerment Bill 
that requires 51% black Zimbabwean share ownership of 
 
PRETORIA 00004103  002.3 OF 005 
 
 
foreign-owned companies but does not include the "25% 
free carry" for government.  This bill, which also 
provides for an empowerment fund to help with share 
acquisition, has still to be signed into law.  South 
Africa's Impala Platinum and Anglo Platinum have existing 
agreements with the GOZ, and a major issue is whether 
their agreements will be honored by the government under 
the new bills.  If the Mines Amendment Bill becomes law, 
Zimbabwe could continue to miss out on the on-going 
international commodities boom as foreign investors are 
likely to stay away. 
 
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MINE ACCIDENTS 
-------------- 
 
 
--------------------------------------------- ---------- 
Government's Hard Line on Mine Accidents Worries Miners 
--------------------------------------------- ---------- 
 
¶5. (SBU) The high level of fatalities in South African 
gold and platinum mines has received intense press 
coverage in recent months.  As of the end of November 
there have been 198 deaths compared to 199 for the whole 
of 2006.  If deaths this year exceed those in 2006, it 
will break an 11-year declining trend.  This has brought 
sharp reaction from Labor and from the SAG.  The National 
Union of Mineworkers has received permission for some 
240,000 miners to strike on December 4 over safety 
issues. 
 
¶6. (SBU) The Department of Minerals and Energy (DME), 
under pressure from government, has reacted by closing 
shafts and mines after fatal accidents to investigate 
causes and conditions.  President Mbeki has ordered the 
Minister of Minerals and Energy to conduct safety audits 
on all the country's mines in the new year, and the DME 
has mooted the possibility of charging managers with 
criminal liability where insufficient safety practices 
can be shown to exist.  In the past, the DME would 
conduct investigations without closing mines, which 
unions felt was just a slap on the wrist.  The DME 
Director General has stated that profits must be 
subsidiary to the loss of life and that he did not think 
mine management was doing enough to ensure the safety of 
workers.  For this reason, DME is taking a hard-line 
approach and closing mines. 
 
¶7. (SBU) Mine closures have lasted for more than a week 
in some mines, which is putting financial strain on 
marginal operations, particularly gold mines where 
margins are thin despite the high gold price.  Mining 
companies have expressed concern about the accidents and 
fatalities and in some instances have unilaterally closed 
down operations after a fatal accident whilst carrying 
out investigations and reparations - Anglo Platinum and 
AngloGold have both closed mines under these 
circumstances.  However, mining companies say that it is 
not necessary to close the whole mine and that on-going 
maintenance is needed to ensure safe working conditions. 
The closures also result in loss of revenue and increased 
operating costs.  Nevertheless, government is determined 
to put an end to safety violations where they exist and 
to increase safety training and awareness among a 
workforce where as many as 50% have no mining experience. 
Qworkforce where as many as 50% have no mining experience. 
 
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URANIUM 
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---------------------------------------- 
Local Uranium Beneficiation 'Sacrosanct' 
---------------------------------------- 
 
¶8. (SBU) South Africa is intent on using its 
 
PRETORIA 00004103  003.3 OF 005 
 
 
beneficiation policy to add as much value to its mineral 
production as is commercially feasible.  The Minister of 
Minerals and Energy recently signed memorandums of 
understanding (MOUs) on energy efficiency and nuclear 
cooperation with Japan's Minister of the Economy, Trade 
and Industry.  After the signing ceremony, the SA 
Minister said it was also possible for the two countries 
to partner in developing South Africa's planned nuclear- 
fuel production capabilities.  The Minister said that 
Toshiba Power Systems had the technology required for 
nuclear fuel production and spent fuel reprocessing, 
which the South African government sees as part of its 
beneficiation strategy for adding value to the country's 
uranium.  (Toshiba owns 51% of U.S. Westinghouse, one of 
two companies bidding to build South Africa's next 
generation of new nuclear power plants).  The Minister 
spoke passionately of South Africa's nuclear fuel 
production ambitions and said that the beneficiation of 
uranium in South Africa was "sacrosanct."  The MOU's also 
cover cooperation on energy efficiency, investment in 
platinum, and joint geological research on rare metals 
and rare earth metals. 
 
¶9. (SBU) South Africa is planning to build at least five 
conventional nuclear power stations, plus a number of 
smaller Pebble Bed nuclear plants (PBMR) by 2025, to 
produce 20,000 MW of additional power.  The government 
wants to ensure that the country has enough feedstock to 
fuel these plants. South Africa was one of the biggest 
uranium producers in the world in the 1960's, has very 
large uranium resources, and is looking to again start to 
enrich uranium to power plant grade.  (The previous SAG 
produced weapons-grade product in the 1970-80's but 
abandoned the project prior to the installation of the 
new ANC-lead government in 1994.) 
 
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DIAMONDS 
-------- 
 
---------------------------------- 
Lesotho Diamond Mine Does it Again 
---------------------------------- 
 
¶10. (SBU) The Letseng Diamond Mine in Lesotho has done it 
again!  Following the discovery of the 601-carat fancy- 
colored Lesotho Brown in 1967, and the 603-carat Lesotho 
Promise, in August 2006, respectively ranked 15th and 16th 
largest diamonds in the world, the mine has now produced 
the 493-carat Letseng Legacy, ranked as the 19th largest 
diamond ever found.  It recently sold for $10.4 million 
and will ultimately be cut into a number of smaller 
stones with an aggregate value of nearly twice that 
price.  The 603-carat Lesotho Promise was originally sold 
for about $12 million and will be cut into some 20 
flawless diamonds ranging from 75 carats to one carat 
with a total estimated value of around $25 million. 
 
¶11. (SBU) The joint owners of the Letseng mine are Gem 
Diamonds and the Lesotho Government.  The prices received 
for Letseng diamonds are a reflection of the rarity of 
its stones and they have the highest dollar value per 
carat in the world.  The mine is noted for the high 
percentage of large stones in the 10-plus carat range. 
Letseng at around 3,100 meters is the highest diamond 
QLetseng at around 3,100 meters is the highest diamond 
mine in the world.  Expensive to operate with a low yield 
of around two carats per hundred tons, the quality and 
size of its stones makes it a viable venture, 
particularly as the market for extraordinary diamonds 
(10-carats and above) continues to grow.  The mine plans 
to double production in 2008. 
 
 
--------------------------------------------- ----- 
Diamond Beneficiation in Africa - Not an Easy Task 
--------------------------------------------- ----- 
 
PRETORIA 00004103  004.2 OF 005 
 
 
 
¶12. (SBU) A diamond beneficiation workshop at the 
Corporate Council of Africa's US-Africa Business Summit 
outlined the challenges to establishing profitable 
diamond cutting and polishing centers in Southern Africa. 
Governments in the region, particularly South Africa, 
Botswana and Namibia are seeking to gain more value from 
their diamonds by adding value to them locally.  However, 
they face major competition from established centers in 
Antwerp, Israel, China and India, which have better 
skills or lower cost than Sub-Sahara Africa. 
 
¶13. (SBU) De Beer's Executive Director said that given 
proper skills training, it would be possible to make 
diamonds the most beneficiated mineral in the region 
within five years.  To achieve this, industry needed a 
targeted effort to train cutters, both locally and within 
the region.  Director Somen Das of Rose Blue, a 
vertically integrated diamond manufacturer, pointed out 
that South Africa's cutting costs averaged $50 to $60 per 
carat whereas Indian and Chinese costs (where 90% of 
stones are cut) were about $8 per carat.  Antwerp and 
Israeli cutting costs are $70 to $100 per carat but they 
have greater skill and experience in cutting bigger 
stones.  He suggested that cutters in Southern Africa 
should focus on stones of a carat and more to be 
competitive. 
 
¶14. (SBU) Das said that his company (Blue Rose) had a 
positive experience in South Africa.  Infrastructure, the 
regulatory system and labor relations were all good but 
that they had more difficulty than expected in training 
and developing local workers.  The company had planned to 
hand over its factory to local managers but found that 
they did not develop technical skills as fast as 
expected.  The company was still using expatriate 
managers were still being used.  The Department of 
Minerals and Energy acknowledged that the challenge of 
skills development in South Africa was a major hurdle to 
be overcome. 
 
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STEEL 
----- 
 
------------------------------------------- 
New Steel Plant for Durban to Supply Toyota 
------------------------------------------- 
 
¶15. (SBU) Growth of the South African vehicle 
manufacturing industry has been strong - total sales for 
2007 are expected to be about $8.6 billion.  Toyota South 
Africa is the leading seller of cars into the domestic 
market and the company has decided to set up a dedicated 
plant to supply sheet steel for its Durban plant.  The 
company opened a $40 million steel plant on the Toyota 
site in Durban at the beginning of November.  The plant 
is a joint venture between Toyota (Japan) and local steel 
company ArcelorMittal and will be operated by Toyota SA. 
The decision to go ahead with the steel plant was based 
on Toyota SA being identified as a vehicle sourcing node 
in the Company's global supply chain.  Durban plant 
production is planned for 220,000 units per year by the 
end of 2008, of which 60% to 70% is intended for export. 
 
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MINING 
------ 
 
----------------------------- 
Benefits of the Mining Sector 
----------------------------- 
 
¶16. (SBU) A 2007 Chamber of Mines report has gone to 
Q16. (SBU) A 2007 Chamber of Mines report has gone to 
lengths to quantify the contribution of minerals to the 
growth and economy of South Africa.  It goes beyond the 
 
PRETORIA 00004103  005.2 OF 005 
 
 
battery limits of a mine and looks at the downstream 
benefits of manufacture products such as, jewelry, motor 
vehicles and parts, ferro-alloys, steel and stainless 
steel, electricity, fuels and chemicals from coal, auto- 
catalysts from platinum, palladium and rhodium, and many 
other products produced from the country's abundant raw 
minerals.  Mining's direct contribution to the economy 
(GDP) in 2006 was $18 billion or 7% and the industry 
employed 460,000 people.  Backward linkages contributed 
some $5.8 billion or 2.2% and 100,000 jobs.  Forward 
linkages contributed $4.5 billion or 1.7% and 55,000 
jobs.  Other spin-off effects contributed $17 billion or 
6.4% and 400,000 jobs.  In total, minerals contributed 
(conservatively) $46 billion or 17.2% of the GDP and over 
1-million jobs, or 14% of total employment.  The social 
structure in South Africa is such that each worker 
supports six to eight others, meaning that seven to nine 
million people (15% to 19% of the country's total 
population) owe there welfare to the minerals industry. 
 
BOST