TORONTO (miningweekly.com) – The CEO of South African miner Sibanye Gold has complained that despite his company’s many positive credentials, it was “really disappointing” that its JSE- and NYSE-listed stocks were trading significantly lower than its contemporaries active elsewhere in the world.
Neal Froneman said he was concerned that investors were not seeing South Africa as the investor-friendly destination government made it out to be and that many were frightened off by the country’s reputation for complex labour relations, as well as disruptive and potentially deadly strike action.
“There is a perception that the labour market is inefficient and not as much in favour of investors as it is to the workers,” he commented during a panel discussion with the South African Department of Mineral Resources (DMR), hosted by professional services firm Fasken Martineau, during the Prospectors and Developers Association of Canada’s yearly convention.
Fasken Martineau partner Nicole Jackson pointed out that many industry players did not know the rules of the game, especially when it came to the Mineral and Petroleum Resources Development Act (MPRDA), the Mining Charter and the broad-based black economic-empowerment (BBBEE) compliance scorecards.
For a miner to be able to extract minerals in South Africa, one of the requirements was to have a 26% BBBEE partner in the company structure. When the first BBBEE deals were struck, many were done on a free-carried basis or on very soft commercial terms, prompting several BBBEE partners to sell their stakes for significant profits.
However, this then meant several mining firms were noncompliant with the Mining Charter, requiring the company to conduct dilutive ‘top-up’ deals to maintain the required level of black-held equity stakes.
The South African Chamber of Mines, which represented miners such as Sibanye and AngloGold Ashanti, had filed a lawsuit against the DMR over whether companies could claim to have met black-ownership requirements, even after beneficiaries had sold their stakes in assets.
Jackson said the case was due to be heard later this month, noting that government had indicated its intention to negotiate a settlement outside of court. A separate application was filed arguing that the Mining Charter, which listed the criteria that companies needed to fulfil to obtain mineral rights, should be declared unconstitutional.
“The top priority for South Africa is to confirm regulatory certainty,” she stressed.
Deputy Mineral Resources Minister Godfrey Oliphant responded by emphasising the importance of ongoing transformation in South Africa’s mining industry.
According to him, the MPRDA had been one of the most solid pieces of legislation in South Africa, ever. In his recent State of the Nation Address, President Jacob Zuma urged that the long-delayed revised MPRDA to be expedited. Oliphant estimated that the new MPRDA would be complete in the second quarter.
Oliphant noted that government preferred to talk about the Mining Charter, rather than defending it in court. However, he reminded the panel that nowhere in South African legislation was there a provision for the concept of ‘once empowered, always empowered’.
“I don’t think we’ll lose this case,” Oliphant said.
High Commissioner of South Africa in Canada Membathisi Mdladlana also weighed in on the discussion, asking why investors were seemingly so scared of working with South Africa’s labour unions, when a country such as Canada was home to much stronger trade unions.
He conceded that it was currently very “rocky” among the South African trade unions, as the two main mining unions – the National Union of Mineworkers and the Association of Mineworkers and Construction Union – were embroiled in a bitter and industry-damaging turf war, prompting many other groups to also splinter off.
Froneman advised that a critical step to restore stability to the labour unions would be to encourage the use of secret ballots when members voted on union matters. This would make it increasingly difficult for union leaders to abuse workers by driving their "secret agendas".
He advised that there was the perception that South Africa's mining industry was a ‘sunset industry’. “But if you look at what Sibanye has achieved, it demonstrates just how much opportunity there is in the country.”
Oliphant said there was no “foreign investment strike” in mining in South Africa, noting that two billion-dollar platinum projects were currently being financed for development in the country.
Sibanye had, to date, produced 1.6-million ounces of gold from its operations in South Africa, and recently moved into the platinum space. With 65 000 employees, Sibanye was the single-largest employer in the country, outside of government. Despite operational challenges, the company maintained one of the lowest-cost portfolios in the sector, maintaining the highest dividend yield globally at 4.2%.