Zwane’s moratorium may block Amplats mine deal
One negative consequence of Mineral Resources Minister Mosebenzi Zwane’s proposed moratorium on transferring mineral rights could be the blocking of Anglo American Platinum’s (Amplats’) sale of its Union mine to black-owned Siyanda Resources for up to R6.4bn.
Zwane caught the market off guard last week by issuing a notice in the Government Gazette that he was proposing to “restrict” the granting of all new mining and prospecting rights as well as mineral rights transfers.
Lawyers have said this was an act beyond Zwane’s powers as stipulated in the Mineral and Petroleum Resources Development Act, certainly in the matter of blocking the transfer of mineral rights, such as those in the Union deal.
Amplats, the world’s largest platinum producer, announced the Union deal in February but was only in a position to file an application for ministerial approval of a section 11 mineral rights transfer in the next few weeks to give Siyanda ownership of Union, which is expected to produce 160,000oz of platinum in 2017.
Amplats CEO Chris Griffith said the department had said companies could submit a written motivation for such deals in the face of the rights moratorium. “We think there is a good case to be made for the Union transaction,” he said.
Another deal that might come unstuck is the conditional sale of two properties to Amplats by beleaguered Atlatsa Resources in exchange for R300m cash and a write-off of R4.2bn debt owed to Amplats.
Atlatsa and its Bokoni mine, in which Amplats has a 49% stake, was one of the empowerment deals set up by Amplats and counts for about 3.7% of the platinum major’s nearly 30% of empowerment credits.
With rand prices for the basket of metals Amplats produces at 2013 levels, 65% of the local platinum mines were unprofitable and another 5% were marginal, said Griffith. The industry had been under pressure for more than three years, he said, and the point was coming where shareholders would withhold their support for rights issues to prop up companies, forcing a cut to production.
His comments echo those of Northam Platinum CEO Paul Dunne, who recently said there would soon be a wave of closures or consolidation in the South African platinum sector, forced by the dire financial situation in which many companies found themselves at a number of their mines.
“You can’t have up to 70% of your industry making losses and for that to continue. Something has to happen,” said Griffith. Amplats had either closed unprofitable shafts or sold highcost mines, such as the Rustenburg mining complex it sold to Sibanye Gold, he said.
“We don’t believe we have a role, or want to have a role, in consolidation of the local sector,” Griffith said.
“We don’t need to consolidate with other producers because we’ve got assets that dominate
the lowest half of the cost curve and so we don’t want to consolidate with assets at the top end of the cost curve.”
Amplats reported a post-tax loss of R1.3bn for the six months to the end of June compared with a R1.5bn profit for the same period a year earlier, with impairments of R2.2bn in the period weighing heavily on the group. The company withheld an interim dividend payment.
Amplats has just one unprofitable asset, the Amandelbult mine in Limpopo. Griffith said the company had a plan to bring down costs at the mine by 25% in the next few years.
Revenue fell 11% to R27.3bn because of lower sales of platinum group metals due to refining difficulties reducing the amount of metal to sell by 8% and a “significantly stronger rand”, said Griffith.
A 14% strengthening of the rand against the dollar during the interim period meant a 13% increase in the dollar price per ounce of metal in the basket of metals Amplats produced was negated. The rand price for that basket of metals fell to 2013 lows of R24,400 an ounce, which was a 3% fall from the same period a year earlier.