Moody’s is­sues a credit down­grade no­tice to SA min­ers

The Star Early Edition - - COMPANIES - Ka­belo Khu­malo

RAT­ING agency Moody’s has put South African min­ing houses on a credit down­grade no­tice fol­low­ing last week’s gazetting of the New Min­ing Char­ter by the De­part­ment of Min­eral Re­sources (DMR).

The no­tice was is­sued yes­ter­day as ques­tions per­sisted about whether the char­ter would pass Con­sti­tu­tional muster.

Dou­glas Rowl­ings, an an­a­lyst at Moody’s, yes­ter­day said in a re­port that the char­ter was “credit neg­a­tive” for South African min­ing com­pa­nies be­cause a num­ber of the re­quire­ments would add to the costs of op­er­at­ing mines and would re­duce free cash flow gen­er­a­tion.

“The re­vised min­ing char­ter was not clearly drafted and is am­bigu­ous in many ar­eas, al­low­ing for a num­ber of sig­nif­i­cantly dif­fer­ent in­ter­pre­ta­tions. It is dif­fi­cult to di­men­sion an ex­act mag­ni­tude of an ad­di­tional eq­uity raise, and most no­tably whether this would be done at a par­ent or mine level, as well as recog­ni­tion of other eq­uity top-up con­sid­er­a­tions,” Rowl­ings said.

He added that it was highly un­likely that the char­ter would be im­ple­mented in its cur­rent form due to it con­tra­dict­ing the rul­ing ANC pol­icy. “The char­ter’s poli­cies run counter to what was out­lined in the Eco­nomic Trans­for­ma­tion Dis­cus­sion Doc­u­ment for the ANC’s National Pol­icy Con­fer­ence sched­uled to take place at the end of the month. It may rec­om­mend that the re­vised min­ing char­ter be with­drawn to al­low for ad­e­quate stake­holder con­sul­ta­tion or it may rec­om­mend amend­ments to the cur­rent draft.” While Moody’s re­port did not con­sti­tute a credit rat­ing ac­tion or im­ply any rat­ing changes, it did in­di­cate that an event or trend was neg­a­tive for an is­suer’s credit pro­file.

Moody’s cur­rently has An­glo Amer­i­can at Ba1 pos­i­tive, while An­gloGold Ashanti is rated at Baa3 pos­i­tive, and Gold Fields at Ba1 pos­i­tive. Pe­tra Di­a­monds has B1 pos­i­tive rat­ing, while Sibanye Gold has a Ba2 sta­ble rat­ing and South32 is rated at Baa1 sta­ble.

Peter Leon, part­ner and co-chair­per­son of the Africa Group at law firm Her­bert Smith Free­hills, said if the Cham­ber of Mines and other in­ter­ested par­ties pro­ceed with threat­ened lit­i­ga­tion, the char­ter would be sub­ject to years of pro­tracted lit­i­ga­tion.

“As South Africa con­tin­ues to slip down the rank­ings of the Fraser In­sti­tute’s An­nual Sur­vey of Min­ing Com­pa­nies (prin­ci­pally as a re­sult of reg­u­la­tory un­cer­tainty) it is un­for­tu­nate that the DMR has missed the op­por­tu­nity to en­hance reg­u­la­tory cer­tainty and pro­mote in­vestor con­fi­dence,” Leon said.

He said it was doubt­ful whether the DMR Min­is­ter Mosebenzi Zwane was em­pow­ered to in­tro­duce Min­ing Char­ter III and de­bat­able whether it was legally bind­ing on the min­ing in­dus­try.

The Min­eral and Pe­tro­leum Re­sources De­vel­op­ment Act Amend­ment Bill 2013 aimed to ad­dress this by el­e­vat­ing the char­ter to the sta­tus of leg­is­la­tion while giv­ing the min­is­ter the power to amend it, but this bill was still be­fore Par­lia­ment and un­likely to pass this year.

Newspapers in English

Newspapers from South Africa

© PressReader. All rights reserved.