SOUTH African mines minister, Mosebenzi Zwane, sought to cast his Department of Mineral Resources (DMR) in positive light after months of bad press, describing it as a “reasonable regulator”. This was after the DMR granted its conditional approval to Lonmin which wants to increase its stake in the Pandora Joint Venture.
The approval of the transaction – which could cost Lonmin between R400m and R1bn – would save 3,000 jobs which might have been lost if the company that owned Pandora was closed down, said Zwane. The deal sees Lonmin buy Anglo American Platinum’s 42.5% stake in Pandora in which it already owns an identical stake.
However, Lonmin would be required to demonstrate how it intended to comply with Broad-Based Black Economic Empowerment (BBBEE) compliance. It’s not currently clear whether this compliance relates to the existing stipulations of the Mining Charter or those contained in the Mining Charter redraft published on June 15.
Lonmin intends to access the adjacent Saffy shaft from Pandora and thereby capitalise on $2.6bn in capex synergies. The variance in the consideration is owing to the transaction structure in which 20% of Pandora’s free cash flow will be distributed over six years. Amplats will also have the use and full operational control of Lonmin’s Baobab concentrator for three years as part of the deal.
“We are a reasonable regulator,” said Zwane in a statement clearly intended as a response to the Chamber of Mines which yesterday said it would apply for an urgent interdict against legislative changes proposed by Zwane.
Zwane added the department applied “… our laws consistently to all right-holders. We continue to appeal to right-holders to make use of our open-door policy and engage with us frankly and opening on issues pertaining to this critical sector of our economy”.
Zwane issued a notice on July 18 in the Government Gazette the effect of which was to freeze new prospecting and mining licence applications which would include those where a change of control approval was required, captured in Section 11 of the Minerals & Petroleum Resources Development Act (MPRDA).
In the notice, Zwane seized on discretional rights in Section 49(1) of the MPRDA which allows him to put a moratorium on prospecting and mining licenses where the national interest was at stake.
Attorneys interpreted this notice – which has not yet been applied – as pushback by Zwane after the Chamber of Mines applied to set aside, review and interdict the June 15 Mining Charter redraft. The Chamber has been critical of the redraft which it said was “egregious” in respect of destroying investment confidence in South African mining.
The other effect in Section 49 is that it vests all powers to receive and grant various rights to the minister “on invitation” by minister. This prevents companies making applications in the ordinary course of business as is normal under the MPRDA’s other provisions, and may well allow “friends” to make applications which will be entertained, said Brandon Irsigler, an attorney for Strata Legal.
Said Zwane today: “Lonmin came and presented its case to us, and one of our primary considerations when assessing their application was how we were best going to prevent retrenchments at the mine. We are indeed pleased that we have been able to save 3,000 jobs, particularly in the current global economic climate”.
The granting of the consent is subject to Lonmin presenting a plan to the Department within five days on how it will address its BBBEE compliance as “… we cannot afford a situation where transformation is compromised,” said Zwane.
