THE Minerals Council of South Africa said the Mining Charter gazetted last week represented “a clear and durable framework”, an acknowledgement that any potential court challenge is highly unlikely.
However, it stopped short of providing a ringing endorsement saying it was concerned about a requirement to adopt new 30% ownership target on mining right renewals. It said the finer details of the document would be negotiated in regulations which mines minister Gwede Mantashe said would be knocked out in the next 60 days.
Whilst the Mining Charter acknowledges 26% as the accepted target for existing mining rights, new mining rights require 30% black ownership. This new target would apply to an expansion of an existing property where a renewal of a mining right would be viewed as a new right. The council also questioned targets on local content in procurement and a threshold that puts junior miners as having R150m in turnover.
Nonetheless, the Mining Charter was a significant stride forward for the sector, said the council – a document it could “broadly support”. Said Mxolisi Mgojo, president of the Minerals Council: “It is perhaps a sign that he has struck a reasonable balance, where all stakeholders are not totally happy.
Areas of the Mining Charter the council lauded was the fact that community participation in new mining rights was via “a carried interest”. This contrasts with the previous definition of “free carry” which presupposes a stake in mining assets has no cost attached to it. As a result, there was an option of “… equity equivalents as on offset to carried interest, said the council without providing details of how this would be structured.
“It is also hoped that greater clarity and certainty will be obtained in the coming weeks, as the guidelines for implementation are developed,” said the Minerals Council.
The broad response to the Mining Charter has been positive. “We believe this legislation is still a better outcome for South African mining risk premia than is currently reflected in South African mining share prices,: said JP Morgan Cazenove analyst, Dominic O’Kane in a note. “An improvement from the draft Charter and we believe the new Charter significantly addresses key investor concerns, particularly on ownership requirements,” said Investec Securities in a morning note.
“Compromise was required for a country and sector with unique legacy issues and, on balance, we believe the 2018 Charter may have found the necessary common ground,” it said. “We continue to worry, however, about South Africa’s attractiveness for new mining investment from global players.”
