BEE investors, frustrated by lack of dividends, put Rio Tinto’s BEE at risk

Richards Bay Minerals, KwaZulu-Natal

RIO Tinto Group’s South African operation is facing the loss of a large bloc of Black investors, a move that would leave it below the legal minimum for Black ownership, said Bloomberg News citing two people familiar with the situation said.

The main investors in Blue Horison Investments Ltd., which holds 24% of Rio-controlled titanium producer, Richards Bay Minerals, have told Rio they want to be permitted to sell a stake they value at R5.5bn ($393m) or have it bought out by RBM, the people said.

The Black investors are frustrated by the suspension of dividends, partly due to disruptions caused by the coronavirus pandemic, and community opposition that stymied expansion plans, said the newswire.

By law, mining assets in the country, at the time when the deal was concluded, must be at least 26% Black-owned. RBM is also 2% owned by Black employees.

“It remains the company’s desire to have a strong and supportive shareholder base for RBM and a structure that ensures ongoing compliance with applicable Black economic empowerment legislation,” Rio said in a response to queries, declining to comment further on the dispute.

2 COMMENTS

  1. There is a lot more legal nuance here than Bloomberg seems to want to understand. RBM had old order rights that had to be converted to new order rights. Those rights were converted – which would have been on the basis of a DMRE approved 26% BEE deal. If the that BEE deal contained within it the right of the the BEE owners to sell at some future point (you hardly own anything if you can’t ever sell it, after all) then that condition would have been approved at the time as part of the package. Those conditions would be contained or referenced in the notarially executed and registered new order Mining Right. RBM can’t lose its rights if it is acting in terms of its approved Mining Right. Or is Bloomberg suggesting SA has completely lost all semblance of rule of law?

    The MCSA is currently litigating the very point that DMRE can’t legally come with new retrospective conditions to say that a deal must be done again and again if that wasn’t a condition of the original Mining Right. To suggest that 26% BEE is an absolute legal requirement betrays Bloomberg’s ignorance of the SA mining scene – and shouldn’t bear repeating by a mining specialist publication like Miningmx.

    To report this story without that at least some context amounts scaremongering in my view. No mining right has ever been cancelled in SA – BEE or not – and to suggest that Rio Tinto’s (a global major’s) would be the first when they are lawyered up to the hilt an would be acting under the very best legal advice, is just weak reporting.

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