South African mining companies are dipping into their stockpiles to maintain production during the pandemic as social distancing requirements limit the number of on-site employees, according to mining industry expert Roger Dixon.

"The South African mines are painting a bright picture, but they are using their inventories to keep up production at the moment," Dixon told S&P Global Market Intelligence. Dixon said it was not clear how mines would reach full capacity under the circumstances, particularly the deep-level operations common to the country.

"Social distancing will likely reduce hoisting capacity to a maximum of 10 employees per deck. This will reduce the available productive hours, with obvious repercussions on total production," Dixon said.

"A lot of companies such as gold and platinum are riding on a high. Palladium and rhodium prices are good. I think when they have to produce at their normal levels, that is when we will see their true colors," Dixon said.

Andrew van Zyl, principal mining engineer for technical service firm SRK Consulting, told Market Intelligence that the efforts mining companies in South Africa are making to address the coronavirus will put them in good stead.

"There is enough price support at the moment to deal with a number of inefficiencies," van Zyl said. "South Africa does have a large body of knowledge — I have stayed in touch with some of the people who are developing the country's national model for COVID-19 [and] they were people I worked with 15 years ago on HIV."

"I am hoping between credible scientists advising government, and mines which have access to epidemiologists, who have backgrounds in communicative, infectious disease and respiratory illness, there is enough for us to keep improving to the point where, if the price support does wane, the mines will continue to operate," van Zyl said.

Mines would be more resilient to a second or third wave of COVID-19 due to the safety and behavioral mechanisms already in place, van Zyl added.

Some commodities, such as platinum group metals and gold, are less likely to be negatively impacted by the COVID-19 outbreak, van Zyl said. "On the PGM front, there is so much of the production that comes out of South Africa that there is a measure of price support no matter how inefficient the mines are. And gold has its own story."

Dixon believes that the pandemic will take a toll on chrome, manganese and coal, noting that they were already under pressure before the coronavirus outbreak. The movement through ports of manganese, which has a long supply chain, has been slow and will remain so until staff numbers in shipping return to normal, Dixon said.

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Mining and manufacturing were the largest contributors to a poor first-quarter performance by the South African economy, according to a June 30 report by Statistics South Africa. In the biggest slump in six years, mining activity decreased 21.5% during the quarter as manganese, iron ore and chromium dragged on growth and offset gains from the coal, diamond and PGM sectors, the report said.

Dixon noted that the coal industry was under severe pressure even before the pandemic, related to decarbonization and requirements for sustainability goals.

"I see quite a bit of the coal that was going to Richards Bay terminal has now been rerouted to state-owned power supplier Eskom Holdings SOC Ltd., and that might be our saving grace on a couple of fronts," Dixon said. "The power outages and power shortages are crippling the mines. If you have a deep-level gold or platinum mine and the power goes down, you are in big trouble. Your concentrators, your mills, everything stops, so maybe there are some positives in the pressure being brought to bear on the coal industry."

The pandemic has made it difficult to predict commodity demand, according to van Zyl.

"It is hard to work out what the medium-term outlook is for vehicles and what the pandemic means for construction. If companies decide employees can work from home in the future, does that mean we have more space than we need?" van Zyl said. "What does it mean for travel? It is foreseeable business travel will remain a fraction of what it was."

Van Zyl said the mining industry was looking to digitization to make operations more efficient, but it was also aware of a responsibility to help the government restore the economy by providing jobs. "I think mines have made progress around real and meaningful engagement to be a responsible part of the community, and this is not something they should move away from," van Zyl said.