Top mining firm’s expansion plan on ice – for now
Sibanye says government should intervene in bid to address major concerns
Heavily indebted Sibanye -Stillwater will hold back expansion capital in SA until three major concerns are addressed, CEO Neal Froneman has said.
In comments that put into context the investor-friendly remarks from President Cyril Ramaphosa in his inaugural address to delegates at the Investing in African Mining Indaba, as well as by mineral resources minister Gwede Mantashe, Froneman pointed out that the picture they paint isn’t as rosy.
Ramaphosa and Mantashe stressed regulatory certainty had been resolved with the gazetting of the third iteration of the Mining Charter after nearly a year of intensive consultation with industry, labour and communities, and the withdrawal of amendments to the Minerals and Petroleum Resources Development Act that were in the works since 2012.
While the comments on the regulatory environment, security of tenure, combating and eradicating corruption, and rolling out the welcome mat for investments in exploration and mining projects are widely welcomed, CEOs noted there are still deep concerns about parts of the charter.
Froneman, who heads SA’s largest domestic gold miner and an increasingly large source of platinum group metals (PGMs), said the demand in the charter for mining companies renewing their mining rights, or those buying them, to top ownership levels up to 30% black ownership from the 26% stipulated in the first two charters is deeply problematic.
Anglo American chief executive Mark Cutifani said in an interview on Monday that this is one of the major concerns that the company and the mining industry, through the Minerals Council SA, is talking to Mantashe to resolve, favouring negotiations instead of court to find a solution.
Froneman said this requirement needs government intervention and resolution before Sibanye ’s board and its shareholders trigger expansion capital projects in SA.
Sibanye spends about R4.5bn a year on stay-in-business capital, a number that will increase once it has taken over Lonmin, the world’s third-largest platinum miner in an all-share transaction, but its growth projects in gold and PGMs will remain suspended until these are addressed, he said.
“It will be difficult to convince investors to approve these sorts of capital expenditures in this environment where these things are outstanding.”
Efforts made by Mantashe so far are gratifying, as is the opening of communication between the minister and the industry, but there are still deep underlying problems outside the regulatory environment that need a broader government response, Froneman said.
Critics point out that Sibanye could not realistically embark on a large new project at this stage, with the reduction of debt over the next few years a clearly stated priority.
The major repayment of $1.09bn (R14.8bn) in bond obligations falls due in 2022, with Sibanye having lowered its bond commitments from $1.5bn (R20.4bn) by putting in place a streaming deal that injected $500m (R6.8bn) cash into the company in exchange for a supply of palladium and gold from its operations in the US.
Froneman stressed that the simmering tension with communities around mines goes beyond what can reasonably be expected from mining companies to fix.
The breakdown in municipal functions and capacity to deliver services, which leads to community unhappiness and rising demands on mining companies’ resources to provide them, has to be urgently addressed by the central government, Froneman said.
Likewise, he criticised the Labour Relations Act as being far too biased in favour of employees, while some unions went out of their way, in some cases, to make it difficult to operate.