Alarm over new mining charter The country’s mining industry waits with bated breath to see if a contentious new mining charter will be written into law. We look at the potential implications for the sector.
sibanye Gold is one of the companies thought to be most at risk by government’s surprise “third” mining charter, a document gazetted by the department of mineral resources (DMR) on 15 April. But the potential damage to the country’s mining sector would extend far beyond just Sibanye Gold, according to a report by Morgan Stanley, which calculated that the net present values of companies in the whole industry would be reduced by a quarter.
That’s assuming the new charter is passed into law in its current format, or even passed into law at all. Arguing the principle of separation of powers, respected mining lawyer Peter Leon, of Herbert Smith Freehills, said in an editorial in Business Day that ministers and departments apply laws but don’t promulgate them.
“We see this draft charter as an opening gambit in the discussions with the industry and we would expect the DMR to make certain concessions to the requirements,” said Morgan Stanley analysts Brian Morgan, Christopher Nicolson and Leory Mnguni in a report dated 20 April.
The requirements include perpetual empowerment equal to 26% of mining firm equity, as well as increased employment equity and procurement targets. It’s the equity part that’s most important though.
That’s because the DMR and the industry are already at loggerheads over the principle of “once-empowered, always-empowered”. The industry has taken the matter to the North Gauteng High Court in Pretoria where it hopes to be on the right side of a declaratory order over whether firms are required to re-empower themselves in the event their BEE holding falls below 26%.
By gazetting a draft mining charter insisting on perpetual BEE of 26%, the DMR has short-circuited the debate. This is onerous for companies such as Sibanye Gold, which saw its empowerment holding in the former Gold Fields gold mines sold down before 2014 following the dissolution of Mvelaphanda Resources.
Perhaps worse still for Sibanye is that the draft charter muddies the waters of its proposed purchase of Rustenburg Platinum Mines from Anglo American Platinum (Amplats), which helped it claim to have fulfilled its BEE targets.
By gazetting a draft mining charter insisting on perpetual BEE of 26%, the DMR has shortcircuited the debate.
By selling the mines, Amplats now technically fails to meet the new 26% target.
Ditto the maturation of the Exxaro Resources/Kumba Iron Ore empowerment deal in November this year, which may leave both of these companies having to find new empowerment partners (Exxaro has already undertaken to do so as it was always a blackcontrolled company).