Re­port shows min­ing houses’ short­com­ings

The Star Early Edition - - BUSINESS REPORT - Di­neo Faku

A RE­PORT on the Min­ing Char­ter has shown how some South African min­ing houses, in­clud­ing Sibanye Gold, fell short of tar­gets in the Re­viewed Min­ing Char­ter, also known as Min­ing Char­ter III, which is un­der scrutiny for be­ing a threat to in­vest­ment and jobs.

The SBG Se­cu­ri­ties, a Stan­dard Bank sub­sidiary, said in a note pub­lished yes­ter­day that among the coun­try’s top four ma­jor gold pro­ducer, Har­mony Gold was lead­ing in terms of em­pow­er­ment own­er­ship cre­den­tials.

“Sibanye falls sig­nif­i­cantly short of new man­age­ment eq­uity tar­gets, while Gold Fields is un­af­fected,” it said.

It said that Har­mony had 37.5 per­cent em­pow­er­ment own­er­ship, Gold Fields was 35.8 per­cent em­pow­ered, Sibanye Gold was 26.8 per­cent em­pow­ered in its gold di­vi­sion and plat­inum di­vi­sions re­spec­tively, while An­gloGold Ashanti was 26.8 per­cent em­pow­ered.

Ac­cord­ing to the Min­ing Char­ter III, the new em­pow­er­ment tar­get is 30 per­cent of min­ing houses and a vot­ing right.

Min­ing com­pa­nies had 12 months in which to top up to this new tar­get from the pre­vi­ous 26 per­cent tar­get in the pre­vi­ous ver­sion of the Min­ing Char­ter.

SBG Se­cu­ri­ties also found that the ma­jor­ity of em­pow­er­ment own­er­ship had been based on cred­its from his­tor­i­cal as­set sales and should be al­lowed if the “once-em­pow­ered, al­ways em­pow­ered” held.

It ar­gued that the draft­ing of the char­ter was am­bigu­ous as it was not clear to what ex­tent Min­ing Char­ter III recog­nised prior deals for em­pow­er­ment own­er­ship.

“An in­crease from 26 per­cent to 30 per­cent is clearly re­quired; to the detri­ment of ex­ist­ing share­holder. The em­ploy­ment eq­uity and pro­cure­ment tar­gets are ma­te­ri­ally higher too, par­tic­u­larly for women in min­ing. The 12-month dead­line to meet all these tar­gets is un­re­al­is­tic in our view”, it said.

The char­ter re­quires that boards should have a 50 per­cent black rep­re­sen­ta­tion with ex­er­cis­able vot­ing rights of which 25 per­cent must be black women.

It also re­quired that 50 per­cent of top man­age­ment be black at ex­ec­u­tive di­rec­tor level as a per­cent­age of all ex­ec­u­tive di­rec­tors, 25 per­cent must be black women.

It also called for a min­i­mum of 60 per­cent of se­nior man­age­ment be black, of which 30 per­cent should be women and 75 per­cent of mid­dle man­age­ment be black with 38 per­cent be­ing black women.

Score­card

In terms of pro­cure­ment, SBG Se­cu­ri­ties said An­gloGold Ashanti would need to im­prove its score­card the most. This is be­cause min­ing rights hold­ers were re­quired to spend a min­i­mum of 70 per­cent of to­tal min­ing pro­cure­ment spend on South African-made prod­ucts.

In terms of plat­inum group met­als, Northam Plat­inum and An­glo Amer­i­can Plat­inum met the new 30 per­cent black own­er­ship tar­get in the char­ter, be­cause Northam was 31 per­cent black owned, and An­glo Plat­inum 32 per­cent black owned.

The world’s big­gest plat­inum pro­ducer An­glo Plat­inum’s com­pli­ance is se­verely de­pen­dent on the treat­ment of as­set dis­pos­als which re­mains am­bigu­ous in Min­ing Char­ter III.

While Lon­min, the world’s third big­gest plat­inum pro­ducer, and Im­pala Plat­inum, the world’s sec­ond big­gest pro­ducer, re­quired top-up deals to meet the 30 per­cent black own­er­ship thresh­old, it said.

“All the pro­duc­ers are ex­posed from an em­ploy­ment eq­uity per­spec­tive, par­tic­u­larly at lower man­age­ment lev­els. Our anal­y­sis shows that Lon­min is the most com­pli­ant from a pref­er­en­tial pro­cure­ment per­spec­tive, with all the other min­ers need­ing cor­rec­tive action in ei­ther the goods or ser­vices cat­e­gories,” said the re­port.

Peter Ma­jor, a min­ing an­a­lyst at Cape Town-based Cadiz Cor­po­rate So­lu­tions, said that the min­ing char­ter was an “im­proved recipe” for even more eco­nomic dis­as­ter in the min­ing in­dus­try.

He said that min­ing had proven to be the worst in­vest­ment and ca­reer choice of all South Africa’s sec­tors for nearly two decades.

“But worst of all – this char­ter will only cause fur­ther and more rapid job losses in South Africa. Does no one seem to care about that?” asked Ma­jor.

Liq­uid gold flows from a fur­nace into a cast­ing mould. Min­ing in SA is the worst in­vest­ment, says an an­a­lyst.

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