Mining Charter will be ready in May

• Speakers reject Mantashe’s public diagnosis that relationships are the root of the problem

Talks on a new Mining Charter were about 80% completed and the new document guiding the transformation of SA’s mining sector would be gazetted in May, giving the industry muchneeded policy confidence, said Mineral Resources Minister Gwede Mantashe, underlining his mandate from President Cyril Ramaphosa to bring certainty to the sector.

The Department of Mineral Resources would not appeal against a high court finding in favour of the Chamber of Mines’ application for a declaratory order on the continuing consequences of past deals and that mining companies were not obliged to perpetually top up their black ownership levels to at least 26% in line with the first two charters, Mantashe said. He was speaking at the one-day Jo’burg Indaba platinum conference in Johannesburg on Tuesday.

His comments to delegates preceded the next round of talks between the department and industry players on the formulation of a new charter, raising hope among some delegates that the disastrous third version of the charter — drawn up under former mines minister Mosebenzi Zwane and suspended shortly after it was gazetted in June 2017 — would be investor friendly.

Although bound by confidentiality agreements, which meant there was little news coming from Tuesday’s charter talks, trade union Solidarity’s general secretary, Gideon du Plessis, said that good progress was being made.

“Although the controversial version of the charter … serves as the basis for negotiations, the next version should be radically different from the Zwane version,” he said. “The Zwane version contains many unimplementable and unrealistic clauses and is fraught with flaws and contradictions, which can now … be rectified.”

Mantashe told the 160 senior industry figures at the conference he had no tolerance for empowerment partners who “speculated” on their shares in a mining company and sold quickly to make an easy profit.

“In those situations of speculation, I don’t think we should punish the company, but equally we don’t want mining companies to dump empowerment partners as they wish,” he said.

“Every case must be dealt with on its merits and we’ll do that. If we must go to court every day, we will go to court every day,” he said, when asked about how the department would assess companies’ compliance with empowerment ownership pegged at 26% in the first two charters and 30% in the third charter — a level the department is unlikely to revise downwards at these talks.

LONG-TERM CHARTER

One executive said the Chamber of Mines was likely to push for a long-term charter of a decade, cementing the ownership levels and obligations on companies for that length of time instead of changing requirements every five years or when a new minister was appointed.

Mantashe said one of his key tasks when appointed as mines minister in February by “Buffalo” — a nickname given to Ramaphosa — was to restore trust between the department and a wide range of stakeholders, including the industry, labour and communities, he said, while at the same time expedite regulatory and policy certainty to give the sector a base from which to grow.

Mantashe said he had spoken to the National Council of Provinces to expedite amendments to the Mineral and Petroleum Resources Development Act that have been in the works since 2012 and returned by former president Jacob Zuma in 2015 to correct what his legal team said at the time were constitutional problems with the document presented to him for signing into law.

Speaker after speaker at a platinum conference highlighted the parlous state of SA’s platinum industry and its declining relevance to world supplies, flying in the face of comments from Mineral Resources Minister Gwede Mantashe that there was no crisis in the sector.

While one executive spoke of the understanding Mantashe had behind closed doors in talks with companies about the dire situation in the local platinum mining sector, the minister could hardly be seen to describe it as an industry in crisis given his constituency and background in the ANC and National Union of Mineworkers and he could hardly concede the point, which could be seen as an endorsement of mine closures, suspensions and job cuts.

“It can’t be a crisis. My own diagnosis of the crisis in the platinum sector is relations with both the workers and communities. When you have a relationship with your workers they understand and they become partners in managing your mines. But we’ve seen a wave of strikes in the last few years and that tells you about the relationship and the impact of running of mines. If we improve that we’ll go a long way,” he said.

But CEOs and analysts, talking at the one-day Johannesburg Indaba Platinum conference, were far blunter and realistic in their assessment.

Stephen Forrest, the chairman of metal research group SFA Oxford, which compiles data and reports for the World Platinum Investment Council, said the prevailing platinum price could be seen as a “closure price” rather than incentivising expenditure on staying in business or large new mines, creating a problem of falling supply from SA. He said that SA, the world’s single largest source of platinum, had fallen from 70%80% of global supply to just above 50%, with recycled platinum making up 25% of supply.

Since 2008, SA had cut 1.5million ounces of platinum production, with small companies closing shop and big mines closing shafts. Another 500,000 ounces of metal had been stalled from coming onto the market as projects were suspended, Forrest said.

“Today’s price is the mine closure inducement price. Today’s price at this exchange rate is what closes mines and doesn’t start mines,” he said.

Paul Dunne, CEO of Northam Platinum, said the rand price for the basket of platinum group metals – the true measure of value for local miners – was down 15% from the November peak last year.

The rand platinum price was about R14,000/oz then and it is now about R11,300/oz.

On average, and looking at the industry on a cash cost basis, the top quartile of South African production, or 1-million ounces, is about R5,000 higher than the current rand basket price, meaning it costs miners R5,000 per platinum ounce more than they receive now.

“Against those numbers this industry today is having great difficulties,” Dunne said, adding the industry had endured a difficult decade already, with low and volatile prices, regulatory uncertainty and labour unrest.

Patrick Mann, an analyst with Deutsche Bank, said that platinum production from the country’s conventional underground and labour-intensive mines was more expensive than recycled metal.

It was hard to see growth in the South African industry beyond Northam’s new Booysendal mine and Royal Bafokeng Platinum’s new Styldrift mine, Mann said.

He said the rand platinum price needed to be above R28,000/oz for the industry to be in a “healthy” position.

The local industry was shifting as quickly as it could to mechanised mining to lower costs, and Nedbank analyst Leon Esterhuizen said this was a damning indictment that SA had lost its labour cost advantage in the global mining industry, with falling efficiencies on underground platinum mines a major problem for companies. seccombea@bdfm.co.za

THE PREVAILING PRICE COULD BE SEEN AS A CLOSURE PRICE RATHER THAN INCENTIVISING EXPENDITURE