[miningmx.com] – IF you hold South African mining shares, you’re probably aware the country’s cabinet has approved a set of amendments to the 2002 minerals legislation, known as the Minerals & Petroleum Resources Development Act (MPRDA).
The question is whether the amendments are anything to worry about? The answer is, yes: the amendments propose some profound changes to the way the mining sector is legislated in the future.
The Chamber of Mines is the principal vehicle through which the South African mining industry will counter government proposals which, in the broadest possible summary, entrench ministerial discretion over the awarding of mining permits.
Privately, the chamber is worried the amendments in their current form will prejudice the sector.
A legal discurses can be a tedious affair, but here are some of the boiled-down facts of the proposed amendments, and what Miningmx believes they mean for the industry in practical terms.
Amendment:
The mines minister has significant discretionary powers over beneficiation.
Meaning:
According to Peter Leon, an attorney for Webber Wentzel, the high level of prescription allowed to the minister is principally directed at coal and iron ore. Government wants to more tightly control the pricing of domestic supplies of both because they are steel-feed minerals.
A “cheap’ domestic steel industry is a key goal of Government’s beneficiation strategy and would give the name of action to an important developmental policy.
Amendment:
The “first-in-first-assessed’ principal of the MPRDA, and South Africa’s minerals dispensation for the last century, is to be replaced by ministerial discretion over to whom it awards mining rights. In terms of the amendments, if you find a mineral you are not automatically assured of being awarded the right to mine it.
Meaning:
Here the amendments would seem to commandeer a key feature of the ANC-backed document, State Intervention in Mining (Sims) which suggests that mineral rights are auctioned to the highest bidder.
South Africa doesn’t have a thriving exploration sector, but this amendment could be its death-knell if applied. Awarding exploration rights by auction also smacks of rent-seeking; the tax proposal to which Sims also gives voice.
Amendment:
The state is asking for a free-carried interest in exploration and production rights in the petroleum industry. In effect, the state would receive a share of profits without contributing to capital development costs.
Meaning:
An opportunistic amendment that recognises the potential value in owning and partly controlling shale gas resources in the Karoo, not to mention a revived interest by major petroleum companies in the Cape’s offshore gas and petroleum industry.
Whereas the MPRDA sought to address historic inequalities of South Africa’s mining industry, such as the monopoly over mineral rights of Anglo American Platinum (Amplats) and the broadening of equity ownership, the intentions of the amendments are narrower. In other words, they seek focused outcomes with shorter time horizons such as greater control over South Africa’s energy industry.
The deadline for public comments is February 8 by which time the chamber will have to compile its view on the amendments. Chamber representatives don’t want to be quoted but they are still unsure as to whether a discussion of the amendments will be through the MIGDETT process. Forget the acronym; remember simply this is the forum by which industry, Government and unions have, quite successfully, discussed broad policies in the past.
Mines minister Susan Shabangu’s anger at Amplats’ proposed restructuring, and her belief that it undermined MIGDETT, must be a worry to the mining sector that without a recognised platform for discussion, it’ll receive short shrift when they take up the cudgels. “The temperature has definitely been raised,’ an industry source told Miningmx.
