CAPE TOWN Feb 5 South Africa hosts the annual Africa mining conference but the country is a hard sell at its own party.
Outside investors are increasingly wary of South Africa's mining sector and extra salt is being rubbed into its reputational wound as the conference coincides with a massive strike in its platinum shafts.
Foreign flight is a huge concern, not least because the industry needs outside investment to sustain itself.
"Because of the capital-intensive nature of the mining industry and the fact that South Africa doesn't have sufficient domestic savings, the industry relies heavily on foreign investment," said Paul Miller, investment banker for mining and metals at Nedbank Capital.
"In order to attract that investment we need to provide a competitive return," he said.
The hardening perception is that the returns in South Africa's mines are too low and the risks too high. Around 45 percent of the country's platinum operations are losing money, according to the industry.
Bankers and executives interviewed by Reuters at the conference all said foreign investors uniformly raised a number of concerns about South Africa, starting with labour.
South Africa's over century-old mining industry has always needed not only huge amounts of capital but has also been highly labour-intensive.
And labour right now is scaring the wits out of capital.
The hardline Association of Mineworkers and Construction Union (AMCU) has been on strike for almost two weeks at the world's top three platinum producers, Anglo American Platinum , Impala Platinum and Lonmin, hitting over 40 percent of global output.
The two sides remain poles apart over wages, with no resolution in sight.
AMCU's rise on the platinum belt has also been marked by violence as it poached tens of thousands of members from the once-unrivalled National Union of Mineworkers in a bloody turf war that killed dozens of people.
MARIKANA TIPPING POINT
This included 34 striking miners shot dead by police outside Lonmin's Marikana mine in August 2012. Bankers and mining executives say that incident was a "tipping point" that sparked an exodus of foreign capital from South Africa's mines.
Lonmin's chief executive Ben Magara told Reuters that before the Marikana shootings, Lonmin, which has its primary listing in London, had 30 percent South African ownership, but it is now 50/50 South African/foreign.
Sibanye Gold, a spinoff from Gold Fields that has all of its operations in South Africa, was around 24 percent domestically owned when launched last year and that ratio has risen to 48 percent, company officials say.
Rajat Kohli, London-based global head of mining and metals at Standard Bank, described the situation as "dramatic" and said some investors he spoke to said they would put money anywhere else in the continent "but not here".
Some bankers said South African investors understood the local mining industry and were not as jittery about sinking money into it as their offshore counterparts - but foreign-exchange controls mean they often have little choice about where to park their cash.
Neal Froneman, Sibanye's chief executive, said South African mining had a lot going for it, including the skills required to extract resources in tough environments. The country had produced about a third of the bullion ever mined and still has vast quantities beneath the ground.
"This is elephant country when it comes to the gold business. There are still more resources to mine than have been mined. We have 100 years of knowledge," he told Reuters.
But he added that "we cannot operate in isolation of the capital markets. We are fooling ourselves if we think we can."
South Africa, which produced almost 80 percent of the world's gold in 1979 and is now only the sixth-largest producer of the precious metal, is also challenged by its geology. The country's mines are the world's deepest, which makes them dangerous and costly to operate.
Investors at the Cape Town conference have been reminded of these challenges by news on Wednesday that emergency workers rescued eight miners trapped a mile underground by a fire and rock-fall at Harmony Gold's Doornkop mine near Johannesburg, but nine other workers remained unaccounted for.
Harmony's chief executive Graham Briggs hastily left Cape Town, where he was to give a presentation at the conference, to attend to the drama unfolding underground.
Investors here have also been put off by the mixed signals given by mines minister Susan Shabangu, who on Tuesday reiterated that discussions were under way that could lead the state to declare minerals such as coal "strategic", which could curb exports. She gave no time frame for such a policy.
This has added a layer of policy and political uncertainty as well as risk to an industry already reeling from the woes of labour strife and tough geology.
"Investors are concerned that given the rise of labour unrest and policy uncertainty within the ANC (African National Congress) government, risks in South Africa are on the increase and margins are getting squeezed," said Tom Wilson, director of consultancy Africa Practice.
"The margins are squeezed so effectively that the risk/reward curve doesn't look as appetizing as perhaps it should."