No escape from nationalisation slur

[] — SO THE nationalisation of South African mines is “on the agenda’ after all. That would be my conclusion of comments by ANC secretary-general Gwede Mantashe in an address to the Progressive Business Forum of the ANC in London on Friday.

He said: “The idea of nationalisation of the mines as raised by the ANCYL [ANC Youth League] will have to go through the ANC’s economic transformation committee, the national general council (to be held later this year) and the policy conference before even reaching the National Conference in 2012′.

“Every idea in the African National Congress goes through a rigorous process before it can become policy,” Mantashe added.

One discerns a subtle change in tone from the “not in my lifetime’ stridency of mines minister Susan Shabangu earlier this year on the question of nationalisation.

Then again, Mantashe’s comments are fairly well consistent with previous ANC comments on the matter. Although the ANC has said nationalisation of mining assets was not policy, it has always fallen short of saying policy wouldn’t change.

Here’s a quote from Mantashe again, this time speaking in February around the time of the Mining Indaba conference: “Our position is very clear on this matter: there is no policy of appropriation of the mines.’ But then added: “You don’t bring finality to a policy debate. Policy debate must always evolve.’

That’s the scary part, the evolution of policy.

Julius Malema, president of the ANCYL, has also evolved his position, and cleverly so. Speaking last week at parliamentary hearings, Malema exploited government’s interest in developing a government-owned mining company by saying it would be the vehicle for nationalisation from about 2012.

There’s no doubting government’s interest in developing a state-owned mining firm.

Every idea in the African National Congress goes through a rigorous process before it can become policy

In an address to the Parliamentary Press Gallery Association in February, president Jacob Zuma said that while ANC and government policy relating to minerals and mining did not provide for the nationalisation of mining assets, it also did not prevent the state from becoming actively involved in mining.

The fact of the matter is that notwithstanding Malema’s rebuke earlier this month, he is back irritating the sore that makes South African mining an uncertain place to be.

It is remarkable how the South African government is able to shoot itself, and the mining sector, in the foot with alarming regularity.

During the last metals boom, South African was legislating the handover of 26% of the mining sector in empowerment deals, most of which had to be vendor financed. It was a political expedience that effectively saw the country miss out on the metals bull run.

It looks like metals are surging back and now talk of nationalisation is injecting into foreign investors a new dimension of uncertainty.

More’s the pity. Tax reform in Australia and even China as mentioned in my previous column could have helped level the playing field in terms of assessing political risk.
But no. South Africa wants to revisit its mining/empowerment legislation when no movement at all from the politicians would have served the country better.

Astronomical hope

I am intrigued to see who or what will put up the money for Galaxy Gold, the latest business venture of mining entrepreneural Peter Skeat.

Skeat said he hopes to give Galaxy Gold public access through a reverse listing in the third quarter of this year, and raise up to R400m in the process. There’s no talk yet of who the potential investors would be, but they will have to swallow Skeat’s gambit of successfully mining a prospect – Barberton’s Agnes mine – that hasn’t had much success whilst under the aegis of Avmin.

The plan is to mechanise mine at least half of the 26 thin orebodies that comprise Agnes, and then extract gold from the ore using a variant of Biox technology Skeat developed. Skeat calls it’s the most exciting gold mining prospect he’s ever had.

I call it speculative. I’d also have pause for thought by Skeat’s recent track-record following the failure of Afrikander Leases, bought from AngloGold in about 1998, and then Mintails, a surface retreatment operation. In both cases, Skeat was embroiled in personality clashes. I’ve spent quite a few years reporting on corporate blow ups the common thread of which always seems to be a lack of judgement and restraint.

The advent of Galaxy may also be a sign of the times the South African gold industry finds itself in. The majors are in some distress, particularly Gold Fields, as making actual post capex profits is a difficult task notwithstanding record dollar gold prices. Talk of restructuring of a fundamental nature is rife throughout the industry, such as the separate listing of Evander Gold Mines from Harmony Gold, or the splitting up of Gold Fields.

And amid all this, is the emergence of questionable junior mining firms of which Aurora Empowerment Systems is the most instructive.

Instead of trying to extract blood from a stone – some of the assets under the control of our juniors are too marginal to trust or simply beyond economic resuscitation – what’s stopping some enterprising soul buying and separate listing one of the last of the major gold mines currently under control of a major mining firm, such as Gold Fields’ Kloof? These are signficant assets that may well benefit from the focus of an independent listing.