JOHANNESBURG (miningweekly.com) – The sustainability and growth of the world’s platinum industry were being threatened by political issues such as South Africa’s debate on the nationalisation of mines and Zimbabwe’s talks around indigenisation, said Impala Platinum (Implats) CEO David Brown.

Speaking at the Gordon Institute of Business Science in Johannesburg, Brown noted that investor worries spurred by policy uncertainties are especially worrisome, considering that about 80% of the world’s platinum-group metals are located in these countries.

“We have noticed a definite unease from investors in Europe and the US as the debate around the nationalisation of South Africa’s mines continues and this will eventually also flow through to investment decisions,” warned Brown.

He believed that the debate around nationalisation had been fuelled by the unsatisfactory level of transformation that had taken place since the dawn of democracy in South Africa in 1994.

“The idea of black-economic empowerment had not worked as well as the people wanted it to, with a lot of narrow-based empowerment taking place.

“This was compounded by the industry not reaching targets set out by South Africa’s Mining Charter,” said Brown.

He stressed the importance of the mining industry rectifying burdens caused by the country’s past, but stated that government also needed to play a role in this. Government should allocate funds, such as the royalties paid by mining companies, to the further transformation and development of mining in South Africa.

Brown warned that if nationalisation were implemented as suggested by the African National Congress Youth League leader Julius Malema, as a kind of ‘free-carry’ it would essentially result in a severe reduction in world platinum output.

“Such a proposal would essentially mean that mines would not be able to generate sufficient returns, thus leaving the industry unable to expand. We need to make money, to put in money, and we need to put in money to meet the growing world demand.”

Implats is undertaking a R25-billion capital expenditure programme to build three new shafts that would increase the miner’s production by 510 000 oz.

The company aims to achieve two-million ounces in platinum production by 2015. Brown said that the further development and expansion of the Zimbabwe business would also play a big role in achieving this target.

But, there, again, the platinum industry is faced with the uncertainty of that country’s proposed indigenisation policy, under which 51% of all investments must be in the hands of locals. “While we are not opposed to some form of indigenisation we do not believe that is reasonable for a 49% stakeholder to take 100% of the risk.”

Brown noted that the company, which trades under Zimplats in Zimbabwe, had submitted its applications stipulating what it considered more reasonable in terms of indigenisation. This included equity component of around 26%, the leasing of the ground and the company’s spend on social and economic infrastructure in the country. “If you add these three aspects together we do believe that the company is more or less complying with the 51% as required by the Zimbabwean government.”

Implats hoped to receive clarification on the issue of indigenisation by the end of the year.
 

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