Mining charter move hits resources
RESOURCES companies weakened on Thursday after the minimum threshold for black ownership of mining firms was raised to 30 percent, dragging an index of the stocks to a 13-month low.
Mines Minister Mosebenzi Zwane released the details of the much-contested revised mining charter earlier on Thursday, raising the threshold from 26 percent. It has not decided if companies must keep that structure permanently.
South Africa’s mining industry said it would challenge the new charter in court, arguing that it had not been consulted enough and it is losing investment as a result.
The mining index was down 2.44 percent by 2.35pm, to a level last seen May 2016. It dipped further to close 3.04 percent lower at 20 503.55 points.
“A lot of the pressure we’re seeing in the resource stocks alongside some weakness in the currency is coming on the back of this revised mining charter and what effectively it’s going to mean for fixed investments going forward,” said BNP Paribas Cadiz Securities economist, Jeffrey Schultz. Implementing the charter would be a significant blow to an industry that was already struggling, Schultz said. Diversified mining company Sibanye Gold dropped 3.52 percent to R16.15, AngloGold Ashanti declined 6.08 percent to R138.31 and Anglo American Platinum retreated 7.18 percent to R281.31.
The benchmark JSE Top40 index weakened 1.27 percent at 44 512.15 points and the broader all share index dropped 1.28 percent to end the session at 50 831.89 points.
Rising interest rates in the US coupled with the release of the mining charter saw investors selling the rand, which weakened significantly.
At 5pm on Thursday, the rand was bid at R12.8738 to the dollar, 26.75c softer than at the same time on Wednesday.
The Federal Reserve raised lending rates by 25 basis points, weakening demand for emerging-market currencies that had seen large flows as a global hunt for yield persisted.
South African bonds were also weaker, with the yield on the benchmark 2026 government bond rising.