The Minerals Council South Africa’s mining input cost index saw a moderate increase of 3.8% year-on-year for January, up from a revised 3% in December.

"This aligns with the overall trend in Statistics South Africa’s Producer Price Index (PPI) for January, which recorded a 1.1% year-on-year increase, though the levels differ," the council points out. 

Excluding financing costs, electricity prices remained a key driver of mining input cost inflation, rising by 10.9% year-on-year in January.

The cost of other chemicals and synthetic fibers also remained elevated, increasing by 10.7% year-on-year. This was driven by higher prices for mining chemicals such as hydrochloric and sulfuric acid, prepared explosives and chemical catalysts, the council notes.

Minerals Council economist André Lourens says global macroeconomic and geopolitical developments are set to significantly impact South Africa's mining sector this year.

"The US Energy Information Administration (EIA) forecasts Brent crude oil prices to average $74/bl, down from $81/bl in 2024, driven by increased global oil production and slower demand growth. While oil prices may stabilise, geopolitical tensions - such as ongoing conflicts in Ukraine and trade disputes between major economies like the US and China - pose risks of disrupting supply chains and impacting commodity prices.

"Domestically, the National Energy Regulator of South Africa (Nersa) approved a 12.72% electricity tariff hike, effective from April and July for different customer categories. This is expected to drive up operational costs for mining companies.

"However, there is some potential relief, as the consensus view is that the South African Reserve Bank (SARB) will reduce the prime interest rate by 50 basis points this year. In our opinion, while we believe only a 25-basis point cut is likely this year, we still hope to be proven wrong and see a larger, 50 basis point reduction, as that would provide greater relief to financing costs," he notes.

Lourens says that while stable oil prices may provide some respite, the mining sector will need to navigate uncertainties in both global and domestic markets.

"Escalating geopolitical tensions, domestic policy changes and currency fluctuations all remain significant risks."