BUSINESS MAVERICK JUNIOR MINING INDABA
Mantashe muddies the policy waters with attack on Sibanye’s BEE record
Minerals and Energy Minister Gwede Mantashe does not know how to woo investors. At the Junior Mining Indaba on Tuesday, he launched a broadside against Sibanye-Stillwater, saying it was reckless on the issue of BEE. Pointedly, he made little mention of the lack of transparency bedevilling the coal sector.
Back in 2004, Gold Fields completed an empowerment transaction in which it sold a 15% stake in its South African mines to Tokyo Sexwale’s Mvelaphanda Resources (Mvela). Most of those mines in 2013 would be spun-off into Sibanye, which is now a gold and platinum group metals producer called Sibanye-Stillwater. Sibanye has always maintained that the transaction meant its gold assets were “once empowered, always empowered”, even though Mvela gradually sold off its Gold Fields shares.
Years later, the minister suddenly brought up the issue during the online Junior Mining Indaba, organised by Resources 4 Africa. He claimed Sibanye had “stolen” the empowerment points.
“We think Sibanye has been reckless in handling a serious issue. That 15% shareholding is abnormal. We are ready to speak to them,” said Mantashe, who is known for his gruff manner.
Sibanye spokesman James Wellsted said the company was confident of its compliance, noting that it was in the process of renewing its mining rights at its Beatrix mine, which produces about 200,000 ounces of gold a year, about 20% of the company’s production. It has an operating life now of approximately six years.
“Introducing a new BEE partner at this stage would be difficult, and given the limited operating life would severely compromise the economic rationale of continuing with the operations. Our view is that it’s the same legal entity that was once owned by Mvela and Gold Fields. It’s still empowered and the entity retains the credit,” Wellsted said.
So Mantashe’s shot across Sibanye’s bows comes at a time when the company’s mining rights – which are tied to things such as BEE compliance – are up for renewal at an operation with a material bearing on its income statement.
“Once empowered, always empowered” simply means that once a mining company has reached a regulated threshold of black ownership, such as 26%, it is fully “empowered”, even if black investors subsequently sell their shares. The government in August dropped a Supreme Court appeal on the issue, but Mantashe’s comments suggest that the matter is far from over.
Which just adds an unwanted element of uncertainty to an already opaque policy environment.
In his address to the conference, Mantashe said that:
“South Africa should be an exploration site that contributes to GDP growth and employment creation. Exploration is the way to go and a priority for the department. We invite the industry to work with us. Sterile mines should be revived, and new minerals discovered. We are committed to promote greater exploration in minerals and upstream petroleum activities. To support this, the quality of geoscience information available for investors is being improved and a comprehensive exploration implementation plan is being developed.”
Making “geoscience” information available for investors and the wider public is crucial. As we reported this past weekend in DM168, South Africa lacks a transparent and freely available mining cadastre portal with maps showing where prospecting rights and the like have been granted.
This gives rise to suspicions that rights have been granted in a potentially corrupt manner – this is the ANC-run government after all – and may threaten ecologically sensitive areas.
And more than one presenter at the conference noted the decline in exploration activities in South Africa.
But Mantashe lashed out at a publicly listed mining company that is transparent about its operations, raising the skeleton of an old empowerment deal.
The mining industry in South Africa has a long and sordid history, and BEE is one of many ways it has been held to account for that past. It has also made many strides in recent years to improve a deplorable health and safety record, to mend community relations, and to lessen its impact on the environment.
Government regulation, legal action, union pressure and increasingly investor demands and wider public concerns have driven these trends. There are still problems, and flashpoints include conflict involving communities that feel they derive scant benefit from the minerals beneath their feet, especially in the former homelands. But publicly listed companies are making efforts on these fronts in a generally transparent manner.
The big skeletons that still need to come rattling out of the closet are at the DMRE itself, and many of the rights it has granted. BM/DM
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