New charter causes crash among mining stocks

luyolo.mkentane@inl.co.za

MINING stocks fell sharply on the JSE yesterday after Mineral Resources Minister Gwede Mantashe announced a gazetted mining charter which sought to strike a delicate balancing act between economic growth and black economic empowerment (BEE) targets.

Impala Platinum (Implats) led the rout, declining 9.15 percent to R26.30, followed by Harmony at 8.46 percent to R23.58 and Gold Fields at 6.6 percent to R33.64.

Mantashe maintained the 30 percent BEE shareholding requirement, but dropped the beneficiation to communities to 5 percent from Zwane’s previous 8 percent.

However, analysts quickly pointed that the juggle may not be enough to revive an industry that has been battered by a slump in commodity prices and escalating input costs.

Investment banking firm Bravura’s empowerment specialist Soria Hay said that, while progress had been made, the balance between growth and transformation remained difficult.

Hay said the new charter would still make mining in South Africa an expensive exercise.

He said empowerment would now be done at the expense of shareholders instead of vendor or third-party financing.

“For instance, say, a mine costs R1 billion to develop, then R100 million of that cost these participants will in essence get for free, and the 90 percent shareholders need to pay the full R1 billion, not only their proportionate amount,” Hay said.

“South Africa has never prescribed in the BEE codes before that a percentage of ownership must be given away for free to any participant.”

Mantashe said the new charter advocated a minimum of 30 percent BEE shareholding, applicable for the duration of the mining right.

He said the shareholding must be made up of a minimum of 5 percent non-transferable carried interest to qualifying employees, 5 percent non-transferable carried interest to host communities and 20 percent for BEE entrepreneurs.

Mantashe said the charter represented a consensus will of all industry stakeholders. “It’s a document that we can all live with,” he said.

In June Mantashe withdrew Zwane’s controversial version of the charter after mining companies represented by the Minerals Council SA approached the courts to have it scrapped. Zwane wanted companies that wanted to apply for mining rights to raise black shareholding to 30 percent within 12 months from the current 26 percent.

The move sent mining stocks into a tailspin and wiped off R50bn in value within weeks.

Last week President Cyril Ramaphosa said that the Cabinet had approved the revised charter in order to bring certainty while charting a sustainable path towards a transformed and inclusive industry.

Yesterday, mining shares wobbled on the new version.