Mintek Update on repurposing of its activities, production of sanitizers & development of manufacturing local test kits; Lilly Mine and Optimum Mine Report, with Minister

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Mineral Resources and Energy

21 August 2020
Chairperson: Mr S Luzipo (ANC)
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Meeting Summary

Video: Portfolio Committee on Mineral Resources and Energy (NA) 21 Aug 2020      Part 2

The Portfolio Committee on Mineral Resources and Energy was briefed by Mintek and the Minister of the Department of Mineral Resources and Energy (DMRE) on the entity’s response to the Covid-19 pandemic.

The Committee welcomed the presentation, and commended Mintek for the good work that it was doing. The entity had repurposed its programmes and facilities since the declaration of the National State of Disaster for Covid-19. The entity developed the capacity to produce 4 000 litres of surface and hand sanitisers per week, which was being distributed to its employees and the DMRE.

Mintek is in the process of expanding and automating its production to meet industry standard and compete with the rest of the market. In order to manage the costs and fully control the opportunity, a semi-automated bottling facility had been procured. This is the most versatile option for the future. Mintek is starting small, but have already produced in excess of 10 000 litres.

Mintek had, in June this year, received its ISO 13485 certification to develop and produce test kits for Covid-19.

There is also collaboration between Mintek and Pelchem, to facilitate the development of a new state-owned pharmaceuticals company. This was welcomed by the Committee.

The Committee wanted to know what the unit cost of sanitisers was in addition to their selling price and how that compared to private sector prices. The Committee was also concerned with market restrictions and enquired about how to get around it.

The Committee raised concerns about the halting of mineral beneficiation to allow for the production of PPE instead. The Minister responded to this by saying that without primary mining, there would be no process of beneficiation, so both of them are important processes and are needed.

The Committee also considered its Report on the Optimum Mine and Lily Mine. No report was adopted; this process will take place in the next meeting.
 

Meeting report

Mintek presentation

Mr Gwede Mantashe, Minister of Mineral Resources and Energy, said his Department would present on interventions which were taken by Mintek in response to Covid-19. Mintek is a science institution. One of the difficulties Mintek currently faces is its ability to mass produce products such as masks. The quantity produced determines the profitability and price of the products in general and also the quality of masks in particular. When Mintek is unable to produce at scale, although they would make good products, they would not make a profit. He said that this is something that the Department was working on with Mintek. There was a discussion with Mintek about their establishing a marketing division, where product research would be undertaken before marketing them.

Dr Vanguard Mkosana, Mintek Board Chairperson, said that when Covid-19 was declared a pandemic, Mintek moved quickly. Mintek had no point of reference to which to refer. The only apparent precedent occurred in 1347, when the Black Death plagued Europe and wiped out almost half of its population. This brought about two major events. It negated feudalism and ushered in capitalism. He said that what they would discuss today will relate to the interventions Mintek had taken in response to Covid-19. This will include the production of sanitisers, the development of Covid-19 rapid test kits, and the development of antigens and antibodies.

Dr Molefi Motuku, Mintek CEO, said that the report would touch on three topics. First, a progress update on the production of sanitisers; second, the development of Covid-19 test kits and finally (and most importantly), the development of antigens and antibodies, which are the active ingredients used in test kits as well as in other applications. Mintek has repurposed some of its program facilities to contribute to the national Covid-19 response. The company developed capacity to produce 4 000 litres of hand and surface sanitiser per week, which they currently distribute to their employees and the Department. It is in the process of upscaling production to supply the market. Mintek has redirected the point of care diagnostics research programme to develop rapid test kits for COVID-19. Moreover, Mintek is working on developing capacity to produce antigens and antibodies that are an essential ingredient to test kits.

He said he believed that producing locally will stimulate the economy and create jobs. The South African Public Health sector uses hand and surface sanitiser in excess of 100 000 litres per day.

Significant issues have been identified with the quality of sanitisers produced in South Africa. In many cases the alcohol content was well below the required 70%. Mintek identified the need (or opportunity) to produce good quality sanitising products. In order to manage the costs and fully control the opportunity, a semi-automated bottling facility has been procured. This is the most versatile option for the future. The company is starting small, but have already produced more than 10 000 litres. A range of sanitiser products conforming with WHO guidelines have been developed, including hand and surface sanitiser and hand sanitiser gel.

These were initially produced at Mintek’s facilities, but where they need to produce at large quantities they have partnered with Ascendis Health for commercial bottling, at no cost to Mintek. A commercial bottling plant has been ordered and is being installed at Mintek in early October 2020. To date, they have produced 9 000 litres worth of hand sanitiser, 1 500 litres of surface sanitiser and 380 litres of gel sanitiser. He said that current operation at Mintek is highly manual. They manually label and fill the bottles before screwing on the caps. This has serious implications in terms of the production rate, the quality of the product, the consistency in filling the bottles, and the labelling accuracy, all of which results in high unit costs, which effects their competitiveness. The manual operation severely restricts their market penetration.

To commence with mass production, Mintek has ordered equipment to manufacture, label and bottle so that accreditation and compliance requirements can be met. He says that the market is highly regulated, so to penetrate it the company must have these elements in place; regulatory compliance is a necessity. On the production of sanitisers, Mintek will have full commercial scale production facility by 8 October 2020.

On the development of rapid test kits, Mintek is developing two types of kits: One is the antibody test kit, which detects SARS-Cov-2 antibodies (the body’s response to the virus) in the blood (by finger-prick). The other is an antigen test, which detects part of the virus via a nasal or oral swab. Mintek currently has a prototype for their test kit and they are submitting it externally for clinical evaluation. If everything goes well, what will remain is for them to register the test kits with South African Health Products Regulatory Authority (SAHPRA) and then start manufacturing sales and distribution. During the months of September and October 2020, the test kits will undergo external evaluations. By November 2020, Mintek will be registered with SAHPRA and by December 2020, the tests will be produced and supplied. The company’s manufacturing facility received ISO 13485 Certification in June 2020. This was a lengthy process that took them two to three years to obtain. It is a necessary certificate, without which sale is not permitted.

The current facilities at Mintek can produce about 25 million test kits per year. Mintek also holds a SAHPRA manufacturing license for HIV and Malaria test kits and are in the process of applying for a Covid-19 manufacturing license. In May 2020, Mintek was awarded MRC/TIA/DSI funding to develop local test kits and reagents for Covid-19. They also have in-house screening via PCR tests, and this is currently being accredited. So far, the company has tested 1 259 of their employees and performed 27 051 screenings for Covid-19 symptoms. Antigens and antibodies are the active ingredients in many diagnostic tests, vaccines and drugs. Antigens are among the components for vaccines and are also used in diagnostics. Antibodies are used in diagnostics and in therapeutics. These will be used for the test kits. Mintek purchases their antigens and antibodies because there is currently very limited capacity to produce them outside the USA, Europe and China. Mintek bought 1ml of antigens and antibodies from three different suppliers, which costed approximately R500 000. Even the delivery process was lengthy. Access to antigens and antibodies has significantly hampered the development of tests and vaccines for Covid-19. Mintek is aiming to produce locally. Currently three Covid-19 antibody sequences have been identified and isolated. Two of these have been shown to be active. These have been cultured using bacterial cells, first, and then mammalian cells to produce sufficient material for further testing and validation. Once validated, larger quantities will be produced in a bioreactor.

In conclusion, the company is on track in terms of the production and supply of sanitisers. They have already started the process of including more products in their production lineup. Mintek has the facility commissioned for the first week of October so that they can supply the market with larger quantities. The antibody test kits are undergoing external evaluation; the antigen test kits are currently undergoing internal evaluation, after which they will also undergo external evaluation. Final approval and manufacturing is expected in December 2020.  Antigen and antibody production is proceeding well - currently two suitable antibodies have been identified and are being produced from bacterial and mammalian cells. The antibodies will then be evaluated in the laboratory before proceeding to clinical evaluation.

Discussion

Mr M Mahlaule (ANC) said that politically, the Minister should unlock the market. He says that when they talk about state capacitation, this is what they mean. He said that when a department needs something, government entities have to compete with foreign companies, and this defeats the purpose for trying to capacitate the state as an organ. He is happy with the work that Mintek is doing and says they just need that push with respect to the market.

Mr K Mileham (DA) welcomed the pivot of Mintek with respect to new technologies and revenue streams, and said that this is something should look be looked at in all state entities. He said that there are three things that stand out for him in the presentation. He asked what the unit cost of production was for the sanitisers; what their selling price was; and how that compares to the private sector prices. Mintek indicated that they are buying equipment and installing a bottling plant. he asked if the cost of production includes the cost of this plant and equipment. The production of antigens and antibodies is an exceptional initiative that goes a long way in setting South Africa up to be a leader on the continent and in the world. He said that they need to look into the cost to ensure competitiveness. He was concerned with the scale of production of sanitisers. He said that the timeline for the production of test kits seemed very long. He said that they need to look into how they can speed up production.

Ms N Hlonyana (EFF) congratulated Mintek on its ISO certificate because this showed progress from the last time that they were at a Committee meeting where the company said it was still awaiting the certificate of approval. She asked why she was not seeing a fire station as a safety measures at the ethanol storage plant, as this is a highly flammable substance. She asked if it is possible for Mintek to get the figures of the MRC/TIA/DSI funding and what this would be used for. She also asked if Mintek is currently producing HIV and malaria test kits or if they merely have the license to do so.

Ms V Malinga (ANC) said that she would like the production of gel sanitisers to be increased so as to supply mine workers, since gel is less flammable than liquid sanitisers, which would work better underground.

Mr V Zungula (ATM) asked why the same energy was not exhibited during talks about mineral beneficiation for commercial scale. He asked when Mintek would use its resources—perhaps in collaboration with the CSIR—to scale up such beneficiation. He said that production of PPE is important, but it should not be used as a reason to delay the beneficiation of minerals in the country.

Mr M Wolmarans (ANC) said that so far the Minister, the Chairperson and the Mintek team have done a good job. He said that the cooperation between Pelchem and Mintek is more than welcome. He said that they had a site visit at Pelchem. He asked for clarification on what ‘restricted markets’ meant and also asked what this would mean for Mintek when they move from manual to automated production.

Mr D Mthenjane (EFF) said that it was very good that the Committee is given an opportunity to listen to entities like Mintek. He said that these entities show that black people can also run companies. It is erasing the colonial setup that depicted Africans as unable to run their own businesses. He said that the work done by Mintek would not only help South Africa, but possibly the rest of Africa. He asked about the collaboration with Acendis Health and asked where this collaboration came from. He said that if it came from Europe, Mintek must be careful because they might also steal their ideas.

Mr S Kula (ANC) welcomed the presentation and said that Mintek continues to be a flagship entity in terms of good governance. It would be unfair to compare Mintek to other private entities that have been in operation for a long time. He said that Mintek needs to be given the space and support to grow its market base.

Dr Mkosana welcomed, with humility, the accolades that Mintek was receiving from the Committee. He said that on the issue raised by many members of the Committee about market access and support given to the company, the Minister should champion for Mintek to be allowed to service the government in other areas that could be in their market. The partnership that they have is working toward building a state-owned pharmaceutical company. They would brief the Committee at the right time. He said that Mintek is currently pooling all company resources needed for this.

Dr Motuku said that the company expects to supply the market with test kits by December 2020. It is the antigens which will be supplied by mid-2021. He said that they had to repurpose their activities in response to Covid-19, which meant that Mintek was not yet ready. They started everything from scratch around the end of March 2020. In the current environment, this is a quick response and he commends his team for responding swiftly to the crisis. Mintek’s scientists and some of its infrastructure had to be refocused and required the company to invest significantly in them to meet these requirements to respond to Covid-19. He said that the biggest challenge had been getting supplies. He said that is why they are responding in the manner that they are, by establishing a dedicated facility so that they can be price competitive. The sanitisers at Mintek meet all the requirements and quality standards, and he added that the entity was doing things the correct way and meeting the required standards. He said that, unfortunately, this comes at a price and said that corners cannot be cut, especially when dealing with the lives of people. In terms of recovering investments in one of their plants, he said that Mintek would not only be producing sanitisers there, but would be diversifying its product range. Its calculations show that in about six months, the cost of that plant would be recovered. He says that it took the entity three years to get the ISO certificate and this spoke to the timeline in the health industry, which is a highly regulated space. He gave an example: three years ago, Mintek was almost ready to supply HIV test kits, but could not supply to Department of Health as the company's facilities were not yet certified. He said that they would be ready to supply Covid-19 test kits as they have been building the capacity to do so.

Mr Alan McKenzie, General Manger: Technology, Mintek, said that ethanol is highly flammable and that that was one of the reasons they chose a location that was far from their laboratories. They followed the protocols for major hazardous installation, and one thing that helped them significantly was that they used the ISO tanks that were shown in the presentation. Those are secure tanks which have in-built safety systems. They also went for two tanks instead of one big one; this mitigates the risk because you have fewer litres at a time in the tanks. There are significant health procedures involved with respect to the Covid-19 materials, since the company is working with infectious diseases, and it has followed these protocols.

Dr Motuku said that on the issue of the quality of their sanitisers, which also relates to the quality of the test kits, the entity engaged with SAHPRA, who indicated that they might use Mintek to supply them with test kits. He said that Mintek also collaborates with the CSIR. The company does serious beneficiation. He said the technology used for the test kits centres around gold nanoparticles. Over the past 15 years, Mintek has developed the expertise to produce gold at a nanoscale to manipulate some of its properties and to attach biological substances to them so that they can produce the test kits. Mintek’s test kits are thus gold-based test kits which is high tech, high-end beneficiation. As to the question of restricted markets, when Mintek supplies hospitals, there are a few things that they need to have in place: They need to be compliant; and they need SAHPRA certification which they currently do not possess due to the company's facilities not meeting the required standard. Hence it has a dedicated facility, so that the entity can unlock and supply the market. The current manual operation is restricting Mintek with respect to supplying the market. He further added that Acendis Health is entirely South African-owned.

The Minister said that capacitating the state is an on-going process. Their ability to produce at scale determines market share. If they produce small quantities, the market share is taken up by others who are competitive in that space. The issue on gel sanitisers being used underground is a marketing point. Important products can be created but they need to be marketed. He said that Mintek is working on that because there must be active marketing of products from the company. He said that the point of not using the production of PPE to delay beneficiation is the exact thinking that is killing their initiative and innovation. He had a meeting with the Mineral Council of Southern Africa and one of the SOEs said that the Minister is putting too many of them on beneficiation rather than primary mining. The Minister said that it is not beneficiation or primary mining; it is both. You can only beneficiate what is produced in primary mining. He said that it is not PPE versus beneficiation; it is doing everything that they can do to increase their productive capacity. The collaboration of Mintek and Pelchem, which would create mass production, would aid in penetrating the market and obtaining a greater market share. On the issue of competing with private companies, the Minister said that Mintek actually has the capacity to compete and outperform the private sector in a number of areas.

The Chairperson said that Mintek remains one of the beacons of hope. They are not only innovative, but when it comes to financial management, Mintek is never found wanting. It is one of the entities that handle their finances well.

The Minister said that they are committing themselves to the oversight of the Committee. They accept the authority of the Committee.

The Chairperson released both the DMRE and Mintek from the meeting. The next item was the report on Optimum, after which the Committee would consider the report on Lily Mine.

Lily Mine: Committee Report

Mr Mahlaule asked for clarification on who is the “she” mentioned on page eight of the Optimum presentation, at the first bullet point.

Ms Hlonyana said that they should replace the “she” with “the Department,” as whoever was making the presentation, was making it on behalf of the Department.

The Chairperson agreed with this and said that they should remove that part from the document and replace it with “the Department.”

Mr Mileham referred to the observations and said that he was not certain what was meant by bullet point two. He said that he understood that salaries had not been paid, but said that it is the part which states that the entity continues to issue invoices against revenue generated that he did not understand. The mine has not been in operation, therefore there is no revenue coming in and he said that there seems to be a disconnect between the revenue and the billing of work done.

The Chairperson said that in the presentation by the BRPs, it was stated that they were continuing with some minimal mining activities.

Mr Mileham asked if the miners, or workers who are actually working at the moment, are being paid or whether no one was being paid.

Mr Wolmarans said that in the presentation it was said that there were employees who were put on special leave. At the same time, there were about 180 employees who had to be rehired by August 2020. The concern was that the people who were put on retrenchment were still owed money, which has not been paid. The concern was that the business rescue practitioners are doing the work, but they are not dealing with the issue of the packages of the retrenched workers.

Mr Mileham said that he might be confusing this with another issue, but he recalls a “Mr Bouberg” from the BRP saying that, as business rescue practitioners, they had not taken money from Optimum; all the funds were still in the company and that they had not been paid themselves.

The Chairperson said that what Mr Mileham was saying was not on Optimum, but rather on Lily Mine. Companies of Lily Mine said that they had not been paid for the work that they did. The Chairperson then moved on to the recommendations.

Mr Mahlaule said that there was request for the financial statements by the business rescue practitioners. The response received was that because they were not audited, the financial statements could not be issued. In light of this, he said that they should make a point that stating that the Department and the business rescue practitioners should present the audited financial statements to the Committee.

Mr Mileham said that the observation is not capturing the essence of what the problem was. The current employees are being paid; former employees who are owed retrenchment packages will be paid when the mine is sold. The business rescue practitioners had already taken their fees. This, he said, was in the Parliamentary Monitoring Group (PMG) report of their Committee meeting on 23 June 2020.

Mr Wolmarans said that Mr Mileham was correct, but in the context of the presentation, the Department seemed to be having issues. He said that if you read between the lines, it does not necessarily say that they have been paid, but they have been issuing invoices for the work that they think they have done, and that there is a perception that by virtue of them giving invoices, that they have been paid.

Mr Mileham said that they should change the wording of that recommendation to say that the retrenchment packages of former employees remain outstanding.

The Chairperson said that they should leave out anything of which they were not sure.

Mr Mileham said that with regard to the next point, it should read that there was confusion about the ownership of Optimum Mine between Tegeta and Charles King. This had been resolved, and Tegeta is the full owner of Tegeta.

Mr Mahlaule said he did not want to disagree with Mr Mileham and asked for clarity. He understood that there would be a deposit of R400 million from Charles King to Tegeta, which is a deposit for buying the company. This is where the confusion seems to be. He said that if a company is sold for R1 billion, and the R400 million in question is said to be a deposit, then it is a purchase.

The Chairperson said that they are preparing a report that will be tabled in Parliament. The observations made were from Members and were subjective. He said that they should say that there is confusion as to who owns Optimum Mine, although the report of the business rescue practitioner says that Tegeta owns Optimum. He further said that the Department is accountable to the Portfolio Committee and asked if the Committee should say that the Department must present the financial statements of Optimum Mine since the takeover of the business rescue practitioners. He said that it should be the task of the Department to get these documents and present them to the Committee, since the Department is accountable to the Committee.

Mr Mileham said that the recommendation is correct and that it should be the DMRE that is keeping them up to date, and it should not be up to the business rescue practitioners to do so. He said that the Committee’s function, and not the business rescue practitioners, is to monitor the DMRE.

Mr A Kotze, the Committee Secretary, said that they should not say that the Department must come before the Committee to present. He said that they should rather say the Department should finalise the financial statements, or something to that effect. He said that they can programme that, and it need not be in the recommendations.

Mr Mahlaule said that he is not sure whether they are correctly understanding. He referred them to page four of the report. He said that he thought they were making an argument for the presentation of the audited financial statements, so that they may get answers as to why the company was in business rescue if the company was not in distress and generated R2.2 billion in revenue. This can be answered using those audited financial statements.

The Chairperson said that seeing the financial statements is in the public interest and thus a task of the Committee.

Mr Mahlaule said that he is happy with the formulation as it is, and he thought that there was a suggestion to remove the business rescue practitioners from the point made about the presentation of financial statements to the Committee. He said that he is against their removal from the recommendation.

Mr Mileham said that he is not sure whether they have the mandate to ask for that. He said that the business rescue practitioners and the financial statements of private companies are not something that fall under the DMRE. He added that it might need to go through the Department of Trade and Industry. The revenue seen on the financial statements do not necessarily mean that the company is profitable, and this is just an indication of money coming in; a perfect example is SAA.

Mr Mahlaule said that it is a fair point raised by Mr Mileham; they don’t know whether it falls within the Department or if it should go through the Department of Trade and Industry. For them to get to the bottom of whether it was revenue or profit, they need the financial statements, and they need the answers to that. He said that they should get the statements, whether it is through the DMRE or the Department of Trade and Industry.

The Chairperson said that they should take out the business rescue practitioners with regard to financial accountability; the fact is that it is the Department that is supposed to report to the Committee. He said that they should allow the Department to account to them and tell them whether they are cooperating with the financial process. Based on that, the Committee must then make a decision as to whether they go to the Committee on Trade and Industry to tell them that there is a matter that falls within their mandate. The Department remains accountable to the Committee on any activity that relates to mining. He then moved on to the Lily Mine report. He said that they will not be adopting any reports today; that will happen next week.

Mr Mahlaule said that when the Committee deals with the report on Lily Mine, that three people were presumed dead. That equates to a declaration of a deceased person. If that is the reason why prosecutions have not happened, this is not a good explanation as to why the NPA has not prosecuted anyone.

Mr Mileham said that they should deal with one issue at a time and should deal with the presumption of death first. He said that there is legislation called the Presumption of Death Act which determines when a death declaration can be made. The Department, or the Committee, cannot just declare a person as being dead or presumed dead, and the only body that has the power to do that is a court of law. There would have to be an application made by the miners’ next-of-kin to have them declared deceased in order for the presumption of death to be valid. Until this has been issued by the court, the NPA cannot prosecute the matter.

The Chairperson said that for future reference, for the body of the report they can only correct it to be a true reflection of what was reported to the Committee. He said that the only part on which the Committee may express their views is on what they have observed on the presentations and what they are recommending. If the Department has put it this way, then that is the way the Department has put it. If the Committee disagrees, then they should bring up the matter where they have a right to voice their opinion.

Mr Mahlaule said that he was fine with this and that Mr Mileham captured him correctly.

On the observations of this report, the Chairperson said that the first point should say that the report had already been sent to the NPA.

Mr Mahlaule said that when the presentation was made, there was a major problem that they could not add as an observation. He believes that one of the major problems was that the same company that is responsible is the one that is playing a role in the back and forth with respect to accepting the offer.

The Chairperson said that the point that Mr Mahlaule is making is that in order for the transaction to be valid, is dependent on the same company, whether they accept the offer or not. The first point under observations should have been that at the stakeholders meeting: there was an agreement to stop the operation due to the dangerous conditions that had prevailed at the time.

Mr Wolmarans asked whether, in light of their conversation, the Committee should not talk about the three workers instead of talking about three bodies.

Mr Mahlaule said that this was what he was talking about.

Mr Wolmarans said that he agreed with Mr Mahlaule’s argument.

The Chairperson said that instead of talking about the three deceased, they should say it is the recovery process and they should just leave it at that.

Mr Mahlaule said that on the last bullet point of the observations, should it not be that the Committee requests the Department to engage with the Department of Trade and Industry in looking at the harmonisation of the Department.

Mr Mthenjane said that there was confusion on bullet point four of the observations; the statement is confusing, and he does not understand.

The Chairperson said that it is the dates that were incorrect, and it should say December 2014. He said that the report should be submitted by 12 September, even if they are on recess.

Mr Mahlaule agrees with both the Chairperson and Mr Mthenjane. He said the point is that they are looking for inspections done prior to the accident.

The report would be adopted at the subsequent Committee meeting.

The Chairperson adjourned the meeting.

 

 

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