For the mining sector, the continuing strong demand for commodities, historically high product prices and supply shortfalls have remained central themes.

The commodities boom is accompanied by greater challenges in many areas. Production costs are rising well ahead of inflation. There is a global shortage of skills in the mining and construction industries, internationally and in SA.

Surging capital costs of establishing new production capacity have increased the risk associated with new projects. Logistical or infrastructural constraints are often leading to severe delivery delays and increased costs. Bad weather has caused other setbacks in many countries.

In SA, local issues have added to the difficulties. Local miners are required to go through a complicated process to meet black economic empowerment requirements and obtain mining licences. Government's plan to introduce new royalty taxes for mining companies threatens to further erode returns on investment.

Electricity blackouts this year have curbed production almost across the SA mining industry. Safety has also presented greater challenges, with shareholders, unions and governments taking a tougher stance.

These issues have contributed to supply shortfalls almost across the industry. They have been particularly severe in the precious metals sector, where mines tend to be deep and more vulnerable to power blackouts and safety-related work stoppages.

However, firm demand for commodities - despite slowing growth in the US and other parts of the developed world - has done much to compensate. For much of the industry it has created an era of prosperity, with increased activity in exploration and investment.

Consolidation has accelerated among the medium-sized and larger players. If successful, BHP Billiton's bid for Rio Tinto will be one of the largest corporate mergers ever and will create the largest mining group by far.

The junior mining sector is growing fast. A spate of smaller-cap mining stocks have been listed on the JSE, with more expected later this year. These include companies based in SA and elsewhere.

Increased confidence, on the part of investors and mining company boards, in the durability of the commodities boom underpins these expansions and deals.

Marius Kloppers - Aiming for a bigger, better producer

BHP Billiton CE Marius Kloppers, who launched the bid for Rio Tinto last November, within weeks of taking over from Chip Goodyear, says the merger - valued at well over US$150bn - will enable the enlarged group to deliver more products more quickly to customers in China, India and other emerging economies.

Rio Tinto rejects the bid on BHP Billiton's proposed terms, but agrees with its rival's bullish outlook for commodities, which will be driven substantially by China.

According to Rio Tinto CE Tom Albanese, China now uses 24% of the world's copper and a third of the world's aluminum, its consumption of the latter having risen 38% last year. China also accounts for "an astonishing" 90% or more of global demand for iron ore (used in steelmaking).

At the Cape Town Mining Indaba in February, Anglo American CE Cynthia Carroll emphasised the effects of rapid urbanisation which, she said, is the key driver of the resource-intensive nature of global growth.

"Never before have so many people been lifted out of poverty, joined the ranks of the middle class, or moved from country to city at such a rate," she said.

"China's level of urbanisation stood at 30% in 1996, but is expected to reach 45% by 2010. Factoring in India's growth, the prospects are that between 2000 and 2020 almost 600m people will have moved to cities in those two countries alone.

"With this forecast, one would be naturally bullish about the long-term prospects for commodities."

Prices of energy (including coal) copper, aluminium, iron ore, gold and platinum have all risen to record highs.

When Eskom's power blackouts disrupted mining production in January, gold rose to more than $1 000/oz, well above its previous historic high of $861/oz in January 1980. In early March the spot platinum price was $2 274/oz, up almost 80% since the beginning of September.

The big diversified miners all have large pipelines of new projects to expand production capacity. Anglo American, says Carroll, has approved projects requiring investments of $12bn across its businesses and is evaluating others at an estimated cost of $29bn. In SA, where the group is still the biggest mining company, it is expanding its platinum, iron ore and coal operations.

The group neared the final phase of its strategic refocusing programme last year. It demerged, and separately listed its forestry and paper division, Mondi, and - in a historic move - sold down its stake in AngloGold Ashanti to 16%, as it no longer regards gold mining as a core business.

The outstanding element of the restructuring - the planned disposal of Tarmac, the UK-based industrial minerals and aggregates business - has been deferred until markets improve.

Anglo has made significant acquisitions, including the Minas-Rio iron ore operation in South America, for more than $1bn and the Foxleigh coal mine in Australia for $620m.

The locally based diversified miner, African Rainbow Minerals, has benefited more than most from the boom and from earlier investments.

Its share has substantially outperformed Anglo American and BHP Billiton in the past two years, thanks to strong profit growth from platinum, nickel and ferro-alloys, with iron ore becoming more important in its earnings.

Patrice Motsepe - Expecting growth from increased contributions from other products as well as expansion in Africa

Chairman Patrice Motsepe says the group expects increased contributions from other products including coal and copper in the next few years. It is also planning growth elsewhere in Africa.

The SA mining industry is investing in many expansions, or new mining ventures, in precious metals, iron ore, ferro-metals, mineral sands and coal. These range from mega projects such as the expansion of Kumba Iron Ore's production capacity at the Sishen ore body, and the development of Gold Fields' South Deep mine, to smaller ventures being established by new junior mining companies.

Nonetheless, industry experts say SA is failing to attract its fair share of investment in the boom. A survey last year by Canada-based Fraser Institute found mining executives said they were worried about regulatory matters and political uncertainty over who will be the next president. SA was placed 50th out of 68 countries on the institute's mineral policy potential index.

Foreigners' limited appetite for investment in SA mining can be seen at several levels. First, the global wave of mergers and acquisitions in the sector seems to have mostly bypassed the local industry.

There have been some deals, such as the Eland Platinum acquisition by Xstrata for almost R8bn. But international companies have shown little interest in bidding for established SA miners such as Impala Platinum or Gold Fields. Many in Australia and Canada have been targeted.

Second, few of the large international groups have sought to establish new mining operations in SA. Elsewhere in Africa, there is more unexplored territory and many ore bodies are known to have attractive potential.

Foreign companies are setting up and running some new ventures. Examples include London-listed Ridge Mining - headed by ex-Lonrho Platinum CE Terence Wilkinson - which has two platinum mining projects on the eastern limb of the Bushveld complex. Australia-listed Coal of Africa is developing several coal prospects.

But the preferred route to gaining exposure to SA mining has been through backing junior exploration and mining ventures, often as portfolio investments.