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FULL LETTER: Robert Mugabe’s resignation notice

President Robert Mugabe’s resignation letter was read out by Zimbabwe parliamentary Speaker Jacob Mudenda to lawmakers gathered at a conference centre in Harare to discuss an impeachment motion on Tuesday.

 

State House

Harare

Zimbabwe

21 November 2017

The Honourable Jacob Mudenda

Notice of resignation as President of the Republic of Zimbabwe

In terms of the provisions of section 96 (1) of the constitution of Zimbabwe, amendment number 20, 2013. Following my verbal communication with the Speaker of the National Assembly, Advocate Jacob Mudenda at 13:53 hours, 21st November, 2017 intimating my intention to resign as President of the Republic of Zimbabwe, I Robert Gabriel Mugabe in terms of section 96 (1) of the constitution of Zimbabwe hereby formally tender my resignation as the President of the Republic of Zimbabwe with immediate effect.

My decision to resign is voluntary on my part and arises from my concern for the welfare of the people of Zimbabwe and my desire to ensure a smooth, peaceful and non-violent transfer of power that underpins national security, peace and stability.

Kindly give public notice of my resignation as soon as possible as required by section 96 (1) of the constitution of Zimbabwe.

Yours faithfully,

Robert Gabriel Mugabe President of the Republic of Zimbabwe.

Petra reports strong Q1 performance, despite strike, Tanzania export ban

Despite labour disruptions at LSE-listed Petra Diamonds’ Finsch, Koffiefontein and Kimberley Ekapa Mining (KEM) Joint Venture (JV) operations in late September, CEO Johan Dippenaar says the group achieved a strong start to the 2018 financial year.

Production for the quarter was down 4% year-on-year to 1.05-million carats, mainly as a result of the planned reduction in tailings production at Finsch and the KEM JV.

Run-of-mine (RoM) production, however increased by 17% year-on-year to 842 809 ct, despite the labour disruptions, which reduced RoM production by about 70 000 ct and tailings production by about 10 000 ct.

“The group is continuing its production build-up and it is encouraging to see the increasing contribution of RoM production,” commented Dippenaar.

The Finsch mine’s RoM production increased by 2% year-on-year to 467 795 ct, owing to improved RoM grades as a result of the continued ramp-up of the Block 5 sublevel cave, as well as owing to high-grade RoM surface stockpiles.

RoM production at Cullinan increased by 35% year-on-year to 250 001 ct, owing to the production ramp-up of the new processing plant. The XRL modules of the plant, which recover coarse material greater than 12 mm in size, were put into operation in September. Two diamonds larger than 200 ct have already been recovered.

At Koffiefontein, RoM production decreased by 19% year-on-year to 12 563 ct, as a result of the loss of about 3 000 ct of production during the labour disruption.

Petra on Monday reported that construction of the ore handling infrastructure at Koffiefontein would be completed in the quarter to end December 31, with RoM production to return to planned levels from the second half of the 2018 financial year.

The KEM JV’s attributable production also decreased by 29% year-on-year to 170 014 ct, with RoM treatment having increased as the modifications to the Central Treatment Plantwere completed.

Meanwhile, production at the Williamson mine increased by 66% year-on-year to 85 213 ct.

However, a ban on the export of Petra’s diamonds from Tanzania, which has now been lifted, negatively impacted on the group’s revenues for the first quarter. Revenues decreased by 17% year-on-year to $78.7-million.

The Tanzanian government on September 28 agreed to allow Petra to resume the export and sale of diamonds recovered at the Williamson mine. This followed the seizure, by government officials, of a parcel of diamonds earlier in September, owing to allegations that the company had under declared the value of the diamonds to be exported.

Petra on Monday said it was yet to realise sales from Williamson for the current financial year and that it continued to engage with the Tanzanian government regarding a solution for the 71 654-ct parcel of diamonds that remains blocked for export.

A 40 000-ct parcel of diamonds recovered at the mine has been shipped to Petra’s marketing office for sale in the second quarter of the 2018 financial year.

 

Source: Mining Weekly

Kumba Iron Ore, union reach wage deal

JOHANNESBURG – South Africa’s Kumba Iron Ore, a unit of Anglo American, and a major union have signed a three year wage deal giving workers an increase of much as a 10% a year, the National Union of Mineworkers (NUM) said on Friday.

NUM, which is the majority union at all of Kumba’s operations, said workers would get an annual pay rise ranging between 7% to 10%.

The parties also agreed a once off payment of R25 065 ($1 905) for all employees covered by the agreement.

NUM in May tabled wage hike demands of 12.5% to 16% with Kumba.

The pay deal is good news for the troubled mining sector in South Africa. Investors have been rattled in recent months by labour unrest, policy uncertainty and depressed commodity prices.

Coal producers and unions agreed in June to retain a collective bargaining framework for wage talks in 2017, defusing friction after NUM threatened to go on strike if mining firms negotiated on a company-by-company basis.

Source: Mining Weekly

Platinum, palladium, rhodium on 3-way price parity path – Northam

The platinum group metals (PGM) market may be heading for three-way price parity, Northam Platinum CEO Paul Dunne pointed out when the company presented a 60% rise in operating profit to R614-million in the 12 months to June 30, reflecting the benefits of the company’s growth strategy, mechanisation at the Booysendal mine and improved palladium and chrome prices.

A higher PGM basket price and higher chrome revenue translated into a 44%-greater year-on-year group cash profit of R5 314 per equivalent refined platinum ounce, on a sales revenue of R6.9-billion. (Also watch attached Creamer Media video).

Dunne remains confident that, over time, PGM demand will grow and supply will shrink, resulting in a more positive price environment for PGM metals.

The company’s mechanised Booysendal – which has an operating margin of 17% – produced well above its nameplate capacity at just under 200 000 oz, with progress at the Booysendal South project adding promise.

Despite labour unrest at the Zondereinde mine, output of 280 172 oz was within a hair’s breadth of last year’s 282 765 oz, at an operating margin of 3.6%.

“The company represents the best risk-adjusted return in the platinum sector,” Dunne told Creamer Media’s MiningWeekly Online at an investor and media briefing where he
emphasised the importance of cost control to maintain the company’s competitive position “in this very difficult market”.

Group costs of R19 736/oz of platinum were 4.6% higher, while perating cash flow increased by 17% to R981.5-million and the cash balance at year-end was R1.8-billion, CFO Ayanda Khumalo reported.

While the platinum price struggles below the $1 000/oz mark, the higher palladium price has provided some support for the basket price as price movements suggest a move towards three-way parity with rhodium.

“However, we must say that overall price performance remains lacklustre and continues to be a source of great concern to our sector,” cautioned Dunne, who described the negative sentiment towards platinum and PGMs in general and the emphasis on the emergence of battery electric vehicles as being overdone.

“Today’s internal combustion engines are clean, efficient and economic to run. In our view, the adoption of battery technology will remain constrained owing to the inherent fundamental chemistry of the battery itself,” he commented.

Capital expenditure (capex) is estimated at R1.3-billion in this financial year, comprising R109-million on sustaining capex and R1.2-billion expansionary capex as Northam grows production down the cost curve, both organically and through acquisition.

Acquisitions include the Tumela block’s mineral resourcesfrom Anglo American Platinum for R1-billion; the acquisition of Eland Platinum mine from Glencore Operations South Africa for R175- million; and subsequent to year-end, the PGM recycling assets in Pennsylvania, US, from A-1 Specialised Services for $10.7-million.

At operational level, the company’s record three-million fatality-free shifts at Booysendal reflect the benefits of the mechanised mining method, with a graphic flashed on to a large screen showing the huge magnitude of safety difference between the conventional Zondereinde and the mechanised Booysendal.

Milled tonnage for the combined operations increased by 6.3% to 4.4-million tonnes, largely on the back of growth at the mechanised Booysendal.

The production of chrome in concentrate increased by 8% to 581 000 t on higher upper group two (UG2) tonnage milled at Booysendal and chrome has become “a very important segment for Northam”. Total revenue per platinum ounce has increased 11% owing to higher chrome and palladium pricing.

The higher production failed to translate into a similar increase in sales volumes, but this will end with the commissioning by year-end of the new furnace at the Zondereinde smelter, where a new drying plant and furnace have to date absorbed capex of R671.6-million.

Capex in the current financial year is expected to reach the R1.3-billion mark, with R109-million of it sustaining and the rest expansionary.

The operational outlook for Northam is healthy. It has a stable production base at Zondereinde and a growing production profile from Booysendal, which is on a particularly strong position on the cost curve.

It is envisaged that Zondereinde will benefit from the Tumelaacquisition over the next three years, raising its production profile to 350 000 oz.

Booysendal South is expected to boost the total Booysendal production profile to 500 000 oz, with the Eland operation contributing 150 000 oz on a five-year ramp-up.

As the company still has a large capital expansion programme ahead of it, project execution will be key to meet the its rising market expectations.

 

Source: Mining Weekly

Technology set to unleash mining innovation – Anglo’s O’Neill

In the next ten years, technology is set to unleash a wave of mining innovation, with the sweet spot centred on changing the thinking around ore bodies and processing plants rather than much-spoken-about automation.

“Our focus has changed from hunting technologies to hunting value,” Anglo American technical director Tony O’Neill told Creamer Media’s Mining Weekly Online in an exclusive interview.

Three-dimensional metal printing, non explosive breakage of rock and microwave preconditioning of rock, as well as medical imaging equipment, are finding rapid application in mineral mining and processing.

The word in the industry is that mining companies that embrace the new era will be successful and the ones that do not will ultimately not survive. Anticipated are mines with footprints that can more readily coexist alongside a community in much the same way as farming.

The good news is that pathways are already starting to develop that change the current mining and processing paradigm.

Technologies are being reconfigured to make mining and processing far more precise, which offers massive potential reward.

Currently, much larger volumes of waste are brought to surface, compared with the scenario more than a century ago. This is because, outside of safety improvements, old methods are still being used today. For instance, in 1900, to obtain 40 kg of copper, 2 t of material had to be mined using 3 m3 of water and 10 kWh of energy, compared with currently having to mine 16 times more material, using 16 times more energy and drawing on double the volume of water.

“It’s risen at such a rate that it’s becoming unsustainable,” O’Neill commented to Mining Weekly Online.

While mining was, in the past, content to be a research and development laggard, other industries were not – and they shot ahead on the technological front, proving up technology that is now available off the shelf for mining to implement.

A successful pilot plant is already pointing the way for the more widespread introduction of coarse-particle recovery, which brings considerably larger-sized particles to surface and slashes water use.

Moreover, with the maturing of robotics technology, research is also being conducted into the introduction of swarm robotic mining, involving the use of small robots that will bring ultra-precision to a hugely wasteful industry.

As more precise mining methods gather momentum, those 40 kg of copper used to illustrate mining’s deteriorating position may one day be mined without any waste at all.

Coarse-particle recovery and advanced fragmentation (using smart blasting technologies) are good examples of putting existing technologies into new configurations to deliver value right now.

None of the technologies used is unproven, but what Anglo has managed to do is configure them in a way that adds immense value, with minimal additional capital investment.

While technology will have to be honed specifically for mining at some stage, a surfeit of technologies is ready for instant application.

“It’s more about a mindset change than having to make massive investments,” Anglo American technology development head Donovan Waller added to MiningWeekly Online.

Much of the improvement is being driven by data science and the modern world’s ability to analyse increasing volumes of data to a very high degree.

Virtually all the technologies needed have come of age; one of the biggest being the stabilisation of information technology, in which other industries have tended to advance much faster than the mining industry. These other industries include consumer electronics, manufacturing, automotive engineering and the pharmaceutical sector.

COARSE-PARTICLE RECOVERY

The coarse-particle recovery process captures coarse particles that are not recoverable using conventional flotation.

By needing to grind to only 500 micron instead of 170 micron, capacity is increased. Less energy is required in the crushing and grinding and water is more easily extracted from the larger particles and then recycled, significantly reducing the need for fresh water. The extraction of interstitial water results in a dry product, which can be dry-stacked, ultimately eliminating the need for tailings dams.

In copper, coarse-particle flotation has the potential to change the cost curve of the industry by allowing for 30% to 40% more throughput at a recovery loss of 2% to 3%, a 20% energy saving and 30% to 40% less water.

This is already a significant achievement for Anglo American in copper, and the company is hopeful of migrating it to other commodities, including platinum in South Africa, where test work is still at an early stage.

If, for example, platinum ore can be pre-sorted in advance and be presented at a grade of 10 g/t instead of 4 g/t, output can be increased by two-and-a-half times from the exact same capital invested.

SWARM ROBOTIC MINING

Swarm robotic mining descales mining to make it much more precise, mimicking the actions of a swarm of locusts devouring a field or an army of ants working independently to execute tasks.

The technology envisages highly selective mining of ore types linked to real-time algorithms across a broad spectrum that includes constraints in energy, prices and associated issues.

As many people as possible are taken out of harm’s way in a remotely controlled environment.

Small operational teams will communicate with each other, without the need for a big-brother view from the surface that controls each of those small operational elements independently in self-learning operations.

WATERLESS MINES

Currently, the industry spends a lot of time adding water to its processes and even more time trying to get the water out afterwards.

A pathway has been developed to end up with a waterless mine through the adoption of a closed loop, using only a fixed amount of water that is then recycled time and again. Anglo already recycles or re-uses more than 60% of its water requirements.

Ultimately, the aim is to arrive at potentially chemical means that allow for the liberation of particles without having to add water to them, to arrive at a waterless process.

SUN, WIND, GRAVITY AND SMALL, GREEN NUCLEAR

In terms of energy, the focus is on using renewables for energy self-sufficiency.

The solutions will be a combination of sun and wind. As the sun does not shine at night and the wind does not always blow, other energy forms, including gravity, will take advantage of the mining sector having depth as one of those solutions.

Ultimately, nuclear may be incorporated should it become “greener”, smaller and more modular, as is expected.

MODULAR CONCEPT

Instead of spending billions to build one big plant, small modular plants will be built and scaled up quickly, with the lifespan of the modules being influenced by the next step up in technology.

Mines will move away from using the same technology for long periods of time and outlaying large capital expenditure on plants that last for 50 years and more.

Smaller, modular, cheaper units will allow for technology upgrades every five years, providing scalability as well as the opportunity to ramp up on new technology that has arisen.

Although mining is not an industry that has been used to technological change, there is no reason why it should not, from now on, accelerate advancing technology quickly, as other industries do.

“Our Future Smart Mining program is about far more than technologies alone. It is end-to-end innovation, in its broadest sense, addressing all aspects of sustainability for the business – safety, health, the environment, the needs of our communities and host governments, and the reliable delivery of our products to customers. Those that innovate and are agile will thrive in this industry. That is mining’s new future.” O’Neill concluded.

 

Source: Mining Weekly

Continued reciprocal trade between S Africa, Australia predicted

Despite the current economic climate in South Africa and the global downturn in mining, owing to low commodity prices, South Africa and Australia will continue to build their reciprocal trade relationship, says law firm ENSafrica.

“South Africa is Australia’s biggest trading partner on the African continent and Australia has more mining projects in Africa than anywhere else in the world,” ENSafrica mining director Lloyd Christie tells Mining Weekly.

He adds that Australia looks westward for investment opportunities and recognises South Africa as its port of entry into Africa and the Southern African Development Community, which includes 15 African countries. “Australia continues to build on a constructive and mutually beneficial business relationship with South Africa.”

South Africa and Australia have similar legal systems, business cultures and practices, as well as accounting practices; and both countries are also well endowed with mineral resources and technical expertise, says Christie.

 These common traits make it easy to facilitate trade and, with the two countries forming the Australia–South Africa Joint Ministerial Commission in 1997, collaboration has increased ever since, he elaborates.

To aid continued collaboration, the Australia–Africa Minerals and Energy Group was established in 2010 to facilitate active engagements between the continents’ mineral resources industries.

Christie points out that, according to employers organisation the Australian Industry Group, there has been a 10% yearly average increase in trade between South Africa and Australiain the past five years.

“This serves as motivation to reinforce the relationship with Australian counterparts and continue attending events that facilitate trade.”

Therefore, ENSafrica will attend the annual Africa Down Under conference for the second time from September 6 to 8 in Perth, Western Australia, to interact and network with clients and investors, and learn about the latest developments in mining in Australia and Africa.

Further, Christie says legal certainty, which is an issue in some African countries, is often a consideration for investors, especially foreign investors such as Australia, when deciding to enter new markets.

“Africa’s labour unrest and factious industrial relations might also scare off mining investors. But, with the global miningindustry having to endure depressed commodities markets for many years, volatility is a natural consequence in any mining jurisdiction.”

He adds that declining commodity prices and profit margins can, ultimately, put strain on employee circumstances, as companies threaten retrenchment and are unable to increase wages. This is not unique to Africa, and is typically not an environment conducive to investment.

Regardless, there are still indicators of continued interest and investment in South Africa and other African countries, says Christie.

ENSafrica mining director Ntsiki-Adonisi Kgame says Australian mining companies still remain significant employers in Africa, which also encourages innovation and skills transfer between the involved countries.

“We’ve seen skills migration from South Africa to Australia, especially in terms of deep-level mining expertise. Australiahas recognised South Africa’s proficiency in this regard and has benefited from that skills transfer.”

ENSafrica plays a significant role in representing South African and Australian mining entities – such as diversified miners BHP Billiton and South32 – when navigating mergers, legislation and general trade issues regarding mineral resources.

 

Source: Mining Weekly

 

 

 

Lonmin to sell excess processing capacity, implement other measures to ensure sustainability

Despite “pleasing” third-quarter production results, which showed an improved mining performance, reduced unit costs and increased net cash in July, platinum mining major Lonmin remains concerned by the persistent adverse macroeconomic conditions, as well as the inflationary cost pressures confronting the platinum mining industry.

The company, which is headed up by CEO and COO Ben Magara, will, therefore, implement further measures to ensure that its operations generate sufficient cash to support a sustainable business, it noted in a statement on Monday.

This follows the initial conclusion of an ongoing review of Lonmin’s operations, which has the primary objective of preserving value for shareholders and safeguarding the long-term interests of employees and all key stakeholders.

The operational review is focused on enhancing the cash produced by the business – from its operations and through releasing capital from those activities where the company is currently bearing the cost of excess capacity and unrealised development potential.

“The review is also designed to position the company to benefit from any future improvement in the platinum-group metals (PGM) pricing environment,” Lonmin stated.

The immediate results of the operational review include initiatives to generate cash through the monetisation of select Lonmin assets and to preserve cash by reducing fixed costs.

Lonmin plans to implement several measures, which will be subject to receiving the necessary consents and approvals.

The measures include pursuing all options to maximise cash from Lonmin’s high-quality downstream processing operations. Lonmin plans to achieve this through the sale of excess processing capacity of up to 500 000 oz/y of platinum.

“This would have the benefit not only of releasing capital for Lonmin, but would also allow other South African PGM producers who currently operate on a sale of concentrate basis to access the profit margin benefits of an integrated beneficiation model,” the company stated.

Lonmin will further implement a review of the company’s major development capital requirements over the next few years. In this regard, Lonmin will consider selling for cash or introducing joint venture partners into Limpopo and Akanani, together with exploring options to introduce funding partners into K4.

Meanwhile, despite a consistent strong performance from the Rowland shaft, Lonmin notes that its current capital position makes it challenging to fund the MK2 project, which is necessary to extend Rowland’s economic life.

While Lonmin believes that the MK2 project will be value-accretive, the company will explore options to introduce funding partners and preserve about 5 000 jobs.

Lonmin also aims to implement a reduction in yearly overhead costs by a minimum of R500-million by the end of the 2018 financial year. The substantial majority of overhead reductions will come from nonproduction central functions as the company seeks to right-size its overheads to its operations.

Lonmin will also continue to identify further overhead and cost savings.

While it is too early to define the ultimate effect of the operational review on the company, the overall aim remains for the business to be cash positive after capital investment.

Lonmin noted that further announcements will be made “as and when appropriate”.

 

Source: Mining Weekly

Price Increase Notice

Dear Valued Customers,

Please click on the following link for the latest price increase notice :

Price Increase 15th August 2017

Kind Regards,

Ropa Mhlanga

Operations Director – Southern African Region

Having stemmed flow of conflict diamonds, new WDC acting president to stay course

The World Diamond Council (WDC) will stay its course, focused on its primary mission of curbing the trade in conflict diamonds, under new acting president Stephane Fischler, who took the helm on July 1 from Andrey Polyakov, who has resigned.

“We have succeeded to almost totally eradicate conflict diamonds from the global market. But, we have to continually remain vigilant, especially in places such as the Central African Republic (CAR), to stop new supplies of conflict diamonds from entering the market,” Fischler tells MiningWeekly Online in a telephone interview from Antwerp, Belgium.

He says the WDC is in the midst of a three-year review of its Kimberley Process (KP) rules, in an effort to expand the programme.

On July 19, 2000, the World Diamond Congress at Antwerp adopted a resolution to strengthen the diamond industry’s ability to block sales of conflict diamonds. The resolution called for an international certification system on the exportand import of diamonds, legislation in all countries to accept only officially sealed packages of diamonds, for countries to impose criminal charges on anyone trafficking in conflict diamonds, and the institution of a ban on any individual found trading in conflict diamonds on the diamond bourses of the World Federation of Diamond Bourses.

The KP is led by the diamond-producing African countries and this system tracks diamonds from the mine to the market and regulates the policing surrounding the export, manufacture and sale of the products.

While the industry is an observer of the KP, only States can be members and they are tasked with implementing the KP rules.

However, according to Fischler, this process is being complicated by a lack of capacity in certain jurisdictions. To build capacity, the WDC has in recent months been hosting diamond evaluation training, for Africans in affected jurisdictions, in Antwerp.

“The real challenge,” he says, “is placing the trainees back in their target countries.”

AREA OF CONCERN
There is only one situation today that is potentially generating concern and that is the CAR, which accounts for less than 1% of global output, Fischler says.

While some zones in the west of the country have been cleared for exports, most of the country is, however, under a blanket ban to export diamonds, as a direct result of ongoing political instability in CAR. The country is under strict monitoring by a team comprising government, industry and civil society representatives tasked with upholding the strict guidelines put forward a year ago to prevent the trade of conflict diamonds, Fischler says.

“Diamonds from the CAR have been slowly returning to the legitimate diamond supply chain under strict supervision of the KP appointed monitoring team. The monitoring process that has been put in place has not come without specific challenges; there have been instances where issues related to the lack of documentation have arisen and as a result the monitoring team took swift and proper action to block shipments that were not meeting the established monitoring guidelines,” Fischler advises.

He adds that the WDC and the KP monitoring team recognise the challenging environment in which the CAR monitoring authorities operate, but nevertheless continues to press the CAR government to increase its efforts to guarantee the traceability of the diamond supply chain within the country and prevent the proliferation of the illicit diamond trade.

As part of this work, there are regular US security updates verifying that declared green zones, or sub-prefectures in CAR, where the export of diamonds has been allowed to resume, continue to remain safe and follow KP procedures.

“The KP continues to become more efficient in our common ability to monitor the exchange of diamonds in CAR, thanks to the more rigorous and efficient work by the local KP focal point. The WDC encourages continued dialogue to identify additional solutions to further strengthen our efforts, but there remains the need for the established guidelines to be strictly followed and local monitoring capacity enhanced. Diamond exports not conforming to the agreed procedures, will continue to be barred from being exported,” adds Fischler.

IMPROVING FRAMEWORK
The WDC relies on governments, United Nations (UN) observers and nongovernmental organisations and their respective reports to give it insight as to what is transpiring on the ground, and by which to gauge the efficacy of its work.

Regional cooperation remains the most critical challenge for the WDC and the KP. Many African nations have significant problems with corruption, porous borders, capacity constraints and loosely regulated alluvial operations.

For this reason, the WDC also supports the work of the Diamond Development Initiative (DDI), launched in 2005 at a meeting of representatives from the UN, national governments, US and UK international development aid agencies, NGOs and the diamond industry. The DDI works to effect systemic change within the artisanal and small-scale mining sector, which accounts for less than 10% of global output, by convening all interested parties in processes and projects that help turn precious stones and minerals into a source of sustainable community development, complementing the KP.

Fischler will serve as acting president from July 1 until May 1, 2018, when he will start his two-year term as WDC president.

 

Source: Mining Weekly

Years of gridlock face South Africa as new rules hurt mining

Executives from Sibanye Gold Ltd., South Africa’s biggest gold miner, were in Los Angeles in the final stages of a roadshow with U.S. bond fund managers last month when a bombshell hit from back home.

The government had introduced shock new rules requiring local mines be 30% black-owned in perpetuity, toughening existing requirements and implying hefty dilution for shareholders. South African stocks tumbled and bond yields rose that day. The measures, called Mining Charter 3, put at risk funding for Sibanye’s $2.2 billion acquisition of Stillwater Mining Co. of the U.S., the biggest foreign takeover by a South African mining company in 16 years.

“We had to hold back the financing, find out what the chartermeant, and rebrief all our potential investors,” Chief Executive Officer Neal Froneman said by phone. “A number of institutional investors pulled out of the bond process saying the risks in South Africa were just too high and it’s becoming uninvestable.”

Companies and investors say the new rules and uncertainty will starve the industry of much-needed capital, shortening mine lives, reducing profits and adding to existing challenges of declining reserves and increasing costs. Most mining companies already offloaded 26% stakes and even entire mines to black investors at preferential rates in the 2000s to comply with previous rules, believing it was a one-time deal.

President Jacob Zuma backed the charter in parliament last month as part of his “radical economic transformation” agenda, intended to boost black participation in an economy that’s still one of the most unequal in the world, 23 years after Nelson Mandela helped end apartheid. But members of the African National Congress party, including Deputy President Cyril Ramaphosa, have signalled their doubts, saying the government and industry should go back to the drawing board and reach a negotiated settlement.

Mining companies have already begun fighting the charter through the courts and say the uncertainty will scare off investors in a country once seen as model of democracy, reconciliation and open markets in Africa. The first lawsuit, to block the charter while it winds through the legal process, has an initial hearing on July 18.

“We’re not going to accept it,” Froneman said. “It’s unconstitutional to abuse shareholders retrospectively.

The legal cases “could potentially take three years to conclude,” said Victor von Reiche, an analyst at Citadel Wealth Management in Cape Town. “In the meantime the mining industry in South Africa will suffer most, as investors will take a wait-and-see approach.”

The charter imposes numerous extra levies on mining, the country’s biggest export industry, at a time when the economy is in recession and suffering from 28% unemployment. It also directs payments that the industry estimates could amount to 3.5 billion rand ($264 million) into a government-controlled fund that will also manage communities’ stakes in mines.

Sibanye managed to complete the bond sale, but at a cost. It’s paying coupons of 6.125% and 7.125% on two bonds worth $1.05 billion, 50 basis points higher than if the government had not published the charter, according to Froneman. The extra interest is worth $5.3 million a year.

“This is bad news for mining, which was already shrinking due to the commodities cycle,” said Dave Mohr, who helps oversee 110 billion rand as chief strategist at Cape Town-based Old Mutual Multi-Managers. “It’s going to scare off investment while they go through the courts.”

The Chamber of Mines, which represents mining companies, has taken the government to court to block the charter and argues that it’s in breach of company law, international agreements and the country’s constitution.

The most controversial of the new rules is around ownership. The charter says mining companies must “top up” black ownership to 30% within the next 12 months. But the firm says it’s unclear whether they must increase from 26% or the current direct black ownership level.

A rule requiring 1% of revenue to be paid to black investors before other shareholders would have consumed 95% of total industry dividends if applied last year, according to the chamber.

MAKING SENSE

“We are struggling as everybody else to try and make sense of this charter,” said Andile Sangqu, speaking in his position as vice president of the Chamber of Mines. “That’s why we’ve opted to go to court.” Sangqu is also executive head of Anglo American Plc’s South African operations.

Mining Minister Mosebenzi Zwane defends the new rules, saying they are necessary to resolve the inequities of apartheid. As the world’s biggest gold producer for a century to 2007, South Africa’s mining industry was a key beneficiary of white minority rule, which ensured cheap labor and few environmental regulations.

More than two decades after that ended, average earnings for black households are a sixth of those of their white counterparts, according to the nation’s statistics agency.

“Anybody who does not want to see black people empowered, anybody who still wants to see black people treated like slaves, raise up their hands and say they are not part of the progressive South Africa,” Zwane told reporters June 23, referring to the charter’s critics.

The regulations’ timing couldn’t be worse. The economy unexpectedly tipped into a recession in in the first quarter, and business confidence reached a more than three-decade low in September, amid political uncertainty. Though the June reading improved, the new mine rules pared its gain.

While South Africa’s mining industry is a shadow of its former self — it peaked in the 1970s — it still represents 21% of exports and employs 457 000 people, about 7% of total employment. Many mineworkers migrate from rural areas and have as many as 10 dependants.

Investors aren’t waiting for the court decision to make a call on South African mining securities. About $3 billion was wiped off Johannesburg-listed mining companies’ market value on June 15, when the charter was announced, although a U.S. rate rise the previous evening also hit commodities stocks globally.

South African mining stocks have traded at a price to book discount for the last five years, according to data compiled by Bloomberg.

If the charter is implemented, shareholders are likely to push back on providing more equity to fund additional black empowerment deals, according to Douglas Rowlings, a Dubai-based analyst for Moody’s Investors Service. That means mining companies would be forced to use existing cash reserves or borrow money.

“That’s a credit negative from our point of view,” Rowlings said. “The market response was hugely negative and contrary to the ANC’s policy of fostering inward investment into South Africa. The effect of the mining charter is totally opposite to that and would result in job losses.”

 

Source: Mining Weekly