SA would compete for $1bn in Anglo investment if Mining Charter conducive

Mark Cutifani, CEO, Anglo American

SOUTH Africa would be in the mix for $1bn worth in new capital allocated annually by Anglo American were the country’s Mining Charter conducive to it, said Anglo American CEO, Mark Cutifani.

“Right now, the Mining Charter isn’t conducive to new investment,” Cutifani said in an interview following the group’s interim results presentation in which it took pre-tax earnings up 11% and paid an interim dividend of some 49 US cents per share.

“If we can make the exploration regime user-friendly – and it’s not now – we would be interested in looking for copper, for example” said Cutifani.

He added that sustaining capital in its South African businesses is currently about $1bn per year, or between $5bn to $6bn over a five year period. “There is no reason why these sorts of numbers couldn’t be replicated in growth capital if the environment was right,” he said. “That sort of spend could be brought in for new projects in the next 10 years, if the investment climate is conducive and competitive versus other mining jurisdictions,” he added.

South African mines minister, Gwede Mantashe, said fresh proposals would be considered regarding his draft version of the Mining Charter with a view to gazetting the document in September and having Cabinet approve it by the year-end. A summit was held earlier this month to consolidate progress of the previous three months of negotiations, but there is still some way to go before all parties could be happy.

The mining industry, as represented by the Minerals Council SA, is not in favour of proposals for a trickle-down dividend and 10% free-carry stake divided equally between communities and employees as a condition of new mining permits.

“From our perspective, we are pleased with the certainty [of the new draft Mining Charter],” Cutifani told analysts in an earlier presentation. “It gives us confidence to continue investing in the existing business.

“But the parameters for new investment [trickle dividend and free carry] are challenges,” he said.  “We have made that clear. The intention on both sides of the fence is to land something. We are in problem-solving mode with the government. We are optimistic, but there is still a bit of work to do,” he said.

An analyst asked if the process of promulgating amendments to the Minerals & Petroleum Resources Development Act (MPRDA) might add another layer of complexity – and uncertainty – to the South African investment environment. Cutifani said the key headwind was the Mining Charter.

“The MPRDA has been floating around ever since I’ve started working in South Africa, and that’s for 10 years,” he responded. “It’s complex … There is still a long way to go, but it doesn’t worry me because the Mining Charter characterises the relationship between government and industry. That is the key sentiment.

“They [the government] will then look at harmonising the two – the Mining Charter and the MPRDA – which will take time. But if you look across the world, the certainty we have in South Africa is pretty robust compared to other places,” he said.

A bill amending the MPRDA was due for promulgation before it was sent back to the National Assembly in January, 2015 by then president, Jacob Zuma. The bill has since been in Parliament where it has been picked over by National House of Traditional Leaders and then the National Council of Provinces, the upper house of South Africa’s Parliament.