It might be the biggest issue in mining you haven’t heard about. But events this week suggest that one “sleeper” problem may be about to leap to the main stage.
That’s the introduction of a new mining charter in key producing nation South Africa. Which the government said is going ahead this coming month — despite objections from miners, who say the new rules will have “dire consequences” for the industry.
The new charter has in fact been winding its way through political process for several months. But South Africa’s department of mineral resources said late last week that the deal is nearly done — with the new rules ready to be finalized for next month.
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The charter as currently contemplated brings some critical changes for South Africa’s mining sector. For one, it will introduce new and additional taxes on mining companies — designed to fund a government body called the Mining Transformation and Development Agency.
The charter also introduces some stringent new requirements for black empowerment. Requiring boards of directors for mining companies to be 50% black persons — and senior management to be 60% black.
The rules also call for 20% of both boards and senior management to consist of black women.
One final contentious point is the so-called “once empowered, always empowered” issue. Springing from current rules that require mining companies to be 26% owned by black shareholders.
Mining companies have argued that if they sell 26% to black owners — and then those owners turn around and sell the shares — they should still be considered “empowered” even if black ownership then falls below 26%.
But the new charter says otherwise. Stating it is the responsibility of the company to ensure a constant 26% black shareholding now and in the future.
South Africa’s chamber of mines released a statement Thursday saying the new changes will be damaging to an industry that already lost $2.6 billion last year. Chamber representatives were particularly concerned about the proposed new taxes — which they say come at a time when mining companies can least afford the burden.
If the charter does go ahead over the coming month, it could push South African mining companies deeper into distress. Potentially affecting global markets for gold, platinum and coal. Watch for final ratification of the charter — and to see what the exact financial effects will be on miners in this key nation.
Here’s to battening down,
Article by Pierce Points