Council can still lobby over Mining Charter
There is still a long way to go before the Mining Charter can be gazetted, giving the Minerals Council time to lobby for changes to aspects of the document some say it brought on itself and that many argue makes local mining investor unfriendly.
The draft charter, which replaces the unmitigated disaster then-mineral resources minister Mosebenzi Zwane gazetted on June 15 2017, was met with an outcry about shortcomings in the document that lays out racial transformation objectives for mining companies.
The charter is a vast improvement on Zwane’s charter, but there are major concerns, not least around the 10% free-carried shares equally split between employees and communities as a condition of new mining rights, the top-up to 30% black ownership from 26% for existing mining rights and a 1% trickle dividend to be paid to the free-carried shareholders from the sixth year of a new right.
A participant in the charter talks during the past two months said the Department of Mineral Resources had simply out-negotiated the Minerals Council SA (formerly Chamber of Mines), pushing it into reactionary positions.
“Other than Cyril Ramaphosa, [Mineral Resources Minister] Gwede Mantashe is one of the best negotiators in the ruling party. He outsmarted the council,” the participant said, speaking on condition of anonymity.
The free-carry stake had been 3% each for communities and labour, the participant said.
The department had increased it to 5% after the council had backed off from their earlier approval of the 3% and suggested 1% each to communities and employees.
The council, however, denies this version of the process, saying it had not supported the 3% proposal and the department increased the percentage after engagements with communities.
The council says the charter contained surprise clauses, unconstitutional elements and others that violated the Companies Act.
The council wants all stakeholders to work together in the 30-day feedback period to calculate the financial implications of the charter and thrash out compromises in the summit to discuss the draft on July 7 and 8.
The need for existing mining right holders with 26% empowerment ownership to top up to 30% within five years was deeply problematic, said Paul Miller, MD of resources investment fund CCP.
The charter did nothing to encourage foreign or even local investment in the sector, he said, adding the plan to set up a single community trust to manage cash from mines was flawed for deeply divided communities riven with competing interests, while the prospects for corruption in these entities was high.
“This is a rushed, botched job,” he said.
The department’s view that it could constantly review the charter underlined that the regulatory environment in SA remains uncertain.
“It does little to raise hopes that SA will once again become a mining jurisdiction that will attract foreign investment, particularly with a free carried interest of 5% to each of the employees and host communities,” said Allan Reid, a director at Cliffe Dekker Hofmeyr.
A damning view of SA as a mining investment destination came from a recent interview with Rick Rule, CEO of Sprott US Holdings, named by Mining Journal as one of the five most influential people in mining.
On Livewire Markets in June he labelled SA as one of two “horrific countries” in which his favoured investment, Ivanhoe Mines, had assets.
The other was the Democratic Republic of Congo.