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Impala rebuffed by Government
David McKay
Posted: Mon, 30 Oct 2006
[miningmx.com] -- SHAREHOLDERS in Gold Fields and Xstrata, a London-listed diversified mining company, may receive good news shortly if the companies confirm, as expected, that they have met some or all of the South Africa mining’s empowerment legislation.
This will entitle the two companies to so-called new order mining licenses and handily removes uncertainty over security of tenure. It also helps grow the perception that South Africa’s government is responding reasonably quickly to criticisms it is too slow shifting a backlog of mining license applications.
In the case of Gold Fields, it will receive a conversion of all its gold mining licenses making it only the second South Africa gold company to be fully compliant after AngloGold Ashanti. Xstrata will receive conversions for its coal assets and a license for one of its alloy assets; the others are still in the application
phase.
It’s understood Anglo Platinum is in no rush to meet its legal requirements – companies have until about 2009 – but the issue is different for another mining bluechip, the R88bn Impala Platinum. It has said in the past it was confident about its chances for a relatively early conversion of mineral rights.
It recently sold a 12.1% stake in Implats to Royal Bafokeng Resources, the private firm that represents the Bafokeng community. Before that, the company helped facilitate the creation of Incwala Resources, a black-controlled firm that has an 18% stake in Lonmin. This it achieved by selling its 27% stake in Eastern Platinum and Western Platinum.
According to Cathie Markus, Impala executive director, the company believes it is effectively 33% empowered, more than meeting the 26%, 10-year requirement slapped on mining firms on promulgation of the mineral and petroleum resources development act in 2004.
But that’s not necessarily how the minerals
and energy department (DME) sees it. Since the sale of the Lonplats deal was done by Implats Holdings, and not Impala Platinum, the title-holder, the deal doesn’t count unless by special Government dispensation, a source in the DME told Miningmx. By way of interest, the sale of shares to the Bafokeng was done through Implats Holdings although that deal doesn’t appear to have been questioned yet by the DME.
There appears to be a legal argument embedded in this situation that hasn’t emerged in license conversions before, and it’s confusing people. Apart from the fact that it raises worries about the use of discretion in the granting of the mineral rights, views in the DME don’t appear to marry either.
Sandile Nogxina, director-general of the DME, said that in principle he had “no problem” with holding companies enacting empowerment deals if the practical outcome is the same. Not unless there’s special information, which in this case could relate to Impala,
preventing a smooth conversion, he said.
That sounded right, said Peter Leon, a lawyer at Weber Wentzel Bowens (WWB) who has represented mining companies in its mineral right conversions before. “I wouldn’t have thought it matters where the empowerment comes from,” he said.
Said Markus: “The deals with the Bafokeng and the ESOP with our employees are in excess of 26% alone. “Both deals are broad-based and the exposure for the RBN and our employees at the Implats level makes economic sense for those participants.”
Markus stopped short of saying the sale of equity in Implats Holdings will unravel, but there’s confusion and unhappiness at the company. “The whole thing is a mystery if the regulator can impose his own interpretation,” said Markus.
As matters stand,
Impala has been asked to come up with “something special” for the DME in order to get special treatment from it. At 33% empowerment, Impala feels there’s plenty special about its BEE efforts.
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