Min­ers wor­ried

Finweek English Edition - - INVESTMENT -

The ex­tent of Govern­ment’s am­bi­tion to take a more hand­son ap­proach to the min­ing sec­tor will be given a full pub­lic air­ing in the Depart­ment of Min­eral Re­sources’ (DMR’s) cur­rent f inan­cial year.

In his maiden budget speech, Min­is­ter of Min­eral Re­sources Ngoako Ra­matl­hodi said that the DMR in­tended to in­tro­duce a State Owned Min­ing Com­pany bill or SOMCO, an­other acro­nym the min­ing sec­tor may start to dread along with SIMS (State In­ter­ven­tion in Min­ing) and the MPRD Amend­ment bill.

All three pieces of leg­is­la­tion pro­pose that Govern­ment take a di­rect hand in ei­ther set­ting prices, con­trol­ling ex­port trade f lows or, in the case of the SOMCO bill, be­com­ing an ac­tive par­tic­i­pant in the min­ing sec­tor as well as reg­u­lat­ing it.

The prob­lem is, no-one yet knows what might be in the bill. “I’ve not seen sight of the bill, but it’s cer­tain that Govern­ment wants to get in­volved in min­ing di­rectly,” said Jonathan Veeran, an at­tor­ney at Web­ber Wentzel in Jo­han­nes­burg.

“All of the coal rights cur­rently in AEMFC will be trans­ferred into SOMCO. I don’t know what the bill will look like but I don’t think the com­pany will be much dif­fer­ent in terms of the struc­ture of a nor­mal State-owned min­ing com­pany in South Africa,” said Veeran.

AEMFC is an acro­nym for the Afri- can Ex­plo­ration & Min­ing Fi na nce Com­pany, the name of the cur­rent Sta­te­owned min­ing com­pany which is cur­rently housed in the Cen­tral En­ergy Fund (CEF).

The AEMFC is es­sen­tially a coal com­pany with a sin­gle op­er­at­ing mine, Vlak­fontein in Mpumalanga, which sup­plied about 1.6m tons of coal to Eskom, ac­cord­ing to the CEF in its 2012/13 an­nual re­port.

It has plans to build two new coal mines – one is ac­tu­ally an ex­pan­sion of Vlak­fontein and the other is a com­mer­cially ques­tion­able coal-to-liq­uids type coal de­posit once owned by BHP Bil­li­ton En­ergy Coal South Africa.

The ques­tion is what AEMFC will be­come once the SOMCO leg­is­la­tion is passed?

Will it be an op­er­at­ing com­pany, or an op­er­at­ing and in­vest­ment com­pany which raises the prospect that it could house the min­ing in­vest­ments in the In­dus­trial De­vel­op­ment Cor­po­ra­tion as pro­posed by SIMS. And might Alexkor, the di­a­mond firm, be wrapped up into SOMCO as well? Govern­ment has al­ready sug­gested Alexkor move into coal pro­duc­tion.

Ra­matl­hodi had t his to say of SOMCO: “One of the crit­i­cal in­stru­ments of the demo­cratic de­vel­op­ment state is greater par­tic­i­pa­tion by the State in the main­stream econ­omy. The es­tabl ish­ment of the state min­ing com­pany rep­re­sents a pos­i­tive step in the right di­rec­tion.” Roger Bax­ter, COO and se­nior econ­o­mist at the Cham­ber of Mines of South Africa, said that the SOMCO would be squarely po­si­tioned to pro­vide coal to Eskom, al­though he had not seen the pro­posed leg­is­la­tion.

“It will be fo­cused on the coal space, but it also needs to com­pete on equal foot­ing in South Africa, es­pe­cially in the area of en­vi­ron­men­tal con­trol. It’s not pro­duc­ing much coal at the mo­ment, but I think it will be an op­er­at­ing com­pany rather than in­vest­ment en­tity,” he said.

There’s also the ques­tion of whether SOMCO will en­velop an­other min­ing com­pany in which Govern­ment has a stake, the Pan African Min­ing De­vel­op­ment Com­pany (PAMDC), an en­tity the late Brett Keb­ble wanted to list, but which also in­cludes the in­ter­ests of the gov­ern­ments of Zam­bia and Zim­babwe.

Said DA Shadow Min­is­ter of Min­eral Re­sources James Lorimer: “It looks as if sev­eral dif­fer­ent de­part­ments are go­ing into busi­ness on their own. I think this is a con­fu­sion and I can­not see it end­ing well.”

Min­is­ter of Min­eral Re­sources Ngoako Ra­matl­hodi

Newspapers in English

Newspapers from South Africa

© PressReader. All rights reserved.