Ashake-up to the mining code in South Africa could have a far-reaching impact on miners listed in the UK, amid fears the government there will try to impose onerous new requirements around company ownership.
A new version of the mining charter is expected to propose raising the mandatory black ownership of mining assets from 26pc to 30pc under the government’s Black Economic Empowerment (BEE) initiative.
But the mining industry is particularly worried about a second proposal, which would require miners to maintain 30pc black ownership even when the original BEE holders have sold their stake.
Under the original charter, mandated in 2004, miners only need “empower” their assets once.
South Africa’s Chamber of Mines has threatened legal action against the government if it imposes the new conditions, which it says will deter much-needed foreign investment and have been drafted with little consultation from the industry.
The new charter – which is months overdue and has been the subject of disagreement within the ruling ANC party – was approved by the cabinet in draft last week and is expected to be made public in a matter of weeks.
Mining contributed SAR286bn (£17bn) to the South African economy, or 7.1pc of its GDP, in 2015. London-listed companies Anglo American, Lonmin, Glencore and Petra all operate in South Africa.
Anglo boss Mark Cutifani has called on the government to ensure that the charter encourages investment. Earlier this year he told The Telegraph that investors would feel that promises had been broken if the government changed the BEE threshold.
“Anglo American is and remains committed to meeting South Africa’s transformation objectives and has been a longstanding and major contributor to transformation,” he added.
“These proposed changes will send a shudder down the backs of investors,” said Kieron Hodgson, analyst at Panmure Gordon.
Hunter Hilcoat, analyst at Investec, added: “We should be alarmed, not only by the BEE threshold increases but by several potential aspects, including the re-empowerment requirements.”
LOCAL MINING companies’ operations may be suspended if they fail to meet the April 30 deadline to secure an International Organization for Standardization (ISO) 14001 environmental management certification, the head of the Mines and Geosciences Bureau (MGB) said on Monday.
“There will be no exemption unless the deadline is extended on meritorious ground to be evaluated by the MGB and EMB (Environmental Management Bureau), like when due to force majeure,” Leo J. Jasareno, director of MGB, told reporters.
Last April 30, 2015, the Department of Environment and Natural Resources issued Administrative Order (AO) No. 2015-07, requiring all metallic mining companies to secure an ISO 14001 environmental management certification within one year from the date of the order. The order covers all holders of valid and existing mineral agreement or financial or technical assistance agreement.
“The extractive nature of mining necessitates a greater degree or standards to ensure that any adverse impact on the environment is properly remediated in accordance to the norms of responsible mining… The requirement for mining contractors to undergo ISO certification will help achieve sustainable growth by the development of an effective environmental management system,” the order read.
Mr. Jasareno said the Philippines is the lone country that mandates mining firms to be ISO-certified. In other countries, companies voluntarily apply for such certification.
Of the 40 mining companies, only Apex Mining Company has requested an extension through a letter sent to the MGB last January.
The MGB chief said most companies are currently undergoing the process of securing an ISO 14001 environmental management certification, which usually takes at least a year.
Under the AO, the MGB can suspend a mining company’s environmental compliance certificate (ECC) and can withhold the issuance of ore transport and/or mineral export permit, if the miner fails to comply with or maintain the ISO 14001 certification.
Michael Drake P. Matias, officer-in-charge/chief of the Environmental Impact Assessment and Management Division, said without an ECC, a company cannot conduct exploration activities.
Ore transport or mineral export permits, which are validated by the MGB, allow a firm to transport and export its mineral ores.
Three companies, namely SR Metals, Inc., OceanaGold (Philippines) Inc., and Philex Mining Corp., have already received ISO 14001 certification, prior to the issuance of the AO last year.
Mr. Jasareno said GreenStone Resources Corp. has also recently received its ISO 14001 certification.
CAPE TOWN – A study into innovation in Africa’s mining sector has shown that mining houses will need to innovate if they want to succeed in a sector marked by plunging commodity prices, deeper and more dangerous mines, greater geographical complexity and labour unrest. The ‘Innovation State of Play: Africa’ report, compiled by Monitor Deloitte and Mining Indaba, shows that the African mining sector is midfield in terms of innovation focus and impact. It scores on the lower end of competence on the industry maturity scale, but is slightly above the Canadian average.
“This hints at an opportunity for the continent to push ahead and truly lead through innovation, particularly as the operational context lends itself to thinking and working differently to unlock efficiencies,” said Deloitte Africa mining leader Andrew Lane. The study, the second of a three-part series which also covers Australia and Canada, examined current perspectives on innovation through a series of executive interviews. It also used the Innovation Scorecard survey methodology developed by the Deloitte innovation unit, Doblin.
Based on responses from mining executives, the current breakdown in Africa’s mining innovation was a relatively balanced 61% core, 23% adjacent and 16% transformational. This innovation ambition matrix is considered to be healthy. It follows a similar trend to the Canadian market. Core innovations are defined as innovations that optimise existing products for existing customers, while adjacent innovations are those that expand existing business into “new to the company” business.
Transformational or new innovations are considered breakthroughs and inventions for markets that do not yet exist. While the African market has a strong focus on core products and markets, including technological solutions to optimise old techniques as and when needed, the survey determined that there is significant scope to unlock higher levels of adjacent and transformational innovation. The study found that companies find it a challenge to spread risk. Lane said innovation needs to address the mine system holistically, incorporating it into social, labour and stakeholder spheres. “This is a view that is more inclined to be embedded in Africa’s mining players and one behind which there is a rallying call to capitalise on more.” Lane said companies need to be clear about what they are working on and how they envision their businesses of tomorrow if they want to unlock the potential of innovation and create a sustainable mining sector. “Importantly, senior management needs to champion innovation, while the appropriate governance structures need to be in place.”
Anglo American has decided to downsize operations across the globe, based on weak commodity prices, declining demand and a sliding rand, meaning that it will contribute towards joblessness. It’s called market discipline, and Anglo’s chief executive, Mark Cutifani urges rivals to do likewise.
Anglo is selling off non-profitable mines but this does not always mean loss-making mines. According to Bench Marks Foundation’s Research study, Policy Gap 7, coping with Unsustainability, and Anglo American Platinum’s (Amplats) June 2013 Interim Report, worker productivity at the Khuseleka and Khomanani platinum mines was 20 percent higher than at its other platinum mines and had doubled its productivity levels. In addition, they had a life span of 20 years. According to Policy Gap 7, “unprofitable” does not mean loss-making but less profit.
The average operating margin for the three biggest platinum producers, Amplats, Impala Platinum and Lonmin, taken together, has been close to 30 percent over 20 years.
Cost of equity
Paul Whitburn, at the time, estimated that the “long-term cost of equity” in South Africa is 14 percent. This “cost” is what shareholders demand back in annual returns and it is a world-leading rate of return. According to the International Monetary Fund (IMF) in 2012, South African non-financial returns were “highly profitable”, coming third among 19 developing countries. But for investors, any return of 10 percent or lower against the background of increased worker militancy for a living wage, spells a crisis.
Yet, South Africa has 85 percent of the world’s platinum. During the five-month strike in 2014, the platinum producers were still able to supply the market. And the platinum price remained constant. One would have expected a scarcity of platinum on the market and higher prices. At the same time platinum producers must have saved billions on wages, while workers are going to feel the brunt and suffer as a result of the global slump in demand.
But if we focus on platinum alone, in 2007 Anglo Platinum employed 88 300 workers, of which 39 000 were subcontracted labour. In that same year, Anglo Platinum retrenched 7 000 of its “own” employees and by 2012, the 39 000 subcontracted labour declined by 35 000 to 4 000. That’s 42 000 jobs already made redundant.
Yet in 2013, Anglo’s draft report titled, ‘Anglo American South Africa – Economic Contribution to South Africa’, in trying to convince stakeholders that it brings enormous benefits to society, states that it employs 82 000 people in all its operations directly and indirectly and contributes towards a further 126 000 jobs. And through what they call ‘induced impact of employee spending’, another 176 000 jobs.
What is obvious is that Anglo have been taking “corrective” measures since the global slump in 2008, and this has gone unnoticed and unchallenged. “Market corrections” as Cutifani calls it, will lead to a further loss of about 10 000 jobs, and if put together with the 42 000 jobs already lost, the impact of this on indirect jobs lost and induced job losses, will have made South Africa significantly poorer. And if each job supports up to 12 or more dependents as claimed by many researchers, the impact of just one job lost is significant.
This is a negative economic impact. It’s worrying as this will further contribute to weakening local demand for goods and services. But more importantly in a fragile country, beset with social unrest, instability and desperation, Cutifani is guilty of exacerbating a huge social problem: that of contributing to deepening unemployment.
If, as the IMF says, South Africa ranks third on productive returns other than financial returns, and job losses are the result of increased productivity, and yet retrenchments still take place, we should all be worried. We are not allowed to question the wisdom of the market. There seem to be rules and dictates that shareholder returns are above question. But that is what we want to challenge.
Henry Ford in 1916 said business could not just be for super profits at the expense of society. He said business had a duty to contribute to society’s development.
Ford, in 1916, slashed the price of the Model T car from $900 (R11 393) to $440 saying: “I do not think we should make such awful profits on our cars… a reasonable profit is right, but not too much.’’
He also said: “Business is a service, not a bonanza, and should be run only incidentally to make money.”
Shareholders, the Dodge brothers, took him to court over this. The court ruled that managers and directors have a legal duty to put shareholder interest above all others and had no legal authority to serve any other interest.
Today the principle “the best interest of the corporation principle” stands. This self interest means that multinational corporations are a law unto themselves no matter the negative impacts they may have on society and the environment.
In 2013, a number of chief executives led by Cutifani engaged with the Vatican, and later with the Church of England, as well as the Methodists. Interestingly, the message they received from these visits was to consider the common good and the concept of meaningful existence. But their actions have been exactly the opposite.
When, for example, platinum was reaping in the profits over 20 years, sustainability plans were never made to set up a workers sustainability wage fund, to take care of this valuable layer of workers during bad times. Instead, the dividends were paid out yearly to shareholders.
Before anyone tells me that today the big pension funds representing millions of workers are shareholders too, let me dispel that myth. According to a report on the JSE, workers’ pension funds constitute 10 percent of the funds traded on the exchange. If one divides these returns between hundreds of thousands of workers, it amounts to very little.
There are first class shareholders and second class shareholders. It’s the first class stakeholders that are creaming it, and that Anglo serves.
Anglo has retrenched over 42 000 platinum workers, and these workers have lost any benefits. That is if the 35 000 subcontracted labour had pension funds in the first place, which is doubtful.
“To stop investing in people in order to gain greater short-term financial gain, is bad business and bad for society.’’
The common good is not served, meaningful existence goes out the window, and winners and losers abound. But for how long? This short-termism, while not considering the value of workers as people with aspirations for a better life but to discard them to the scrapheap, speaks volumes about the kind of world we live in. It also tells us the true nature of big capital.
No wonder we have a messed up society. With corruption, bribery, rampant disregard for people and the environment, as well as the global elites who believe they deserve their ill-gotten gains, what hope do we have.
The same companies who are retrenching workers, talk of stakeholder capitalism and win/win models of operating. Cutifani, brags about market discipline and calls upon his fellow chief executives in mining to follow suit. This is to maintain profits at a certain level. What is right for shareholders comes at the expense of society. This cannot be right and needs to be challenged, as more money moves to the top of the pyramid and less to the bottom where it is needed the most.
During the five-month long platinum strike, the industry more than anyone else, complained, stating that the strike was economic sabotage. Now they happily promote economic sabotage. So what if they have some lean years! They had 20 years of what can be considered super profits and are responsible for this crisis: flooding the market with excess platinum, bad planning and seemingly unable to read the trends. As a result workers suffer. But so do you and me.
Cutifani should have shown leadership: by protecting jobs, developing plans to deal with the slump in commodity prices and by contributing to the National Development Plan and significantly contributing to societal socio-economic development. This fixation of profitability levels at 14 percent returns comes at a heavy price.
Words of wisdom have been given to Anglo. It must use these and turn these into actions. Business must be a service to society and not a law unto itself. Restraints need to be imposed on profits so benefits are more equitably distributed. To do so, will ensure that we will all be better off.
The biggest mining super-cycle in recent memory, beginning in the early 2000s and fueled by unprecedented emerging market growth, is now history: Head-counts have been slashed, fleets parked and exploration budgets flattened, with profits falling by 71 percent to $20 billion by 2013. This year, with the plunge of copper – and most base metals – the bottom fell out completely.
In the background, a different type of erosion has long since begun: Wholesale sustainability cutbacks – the timing of which could hardly be worse. A 2014 Harvard study crystallized the urgency, reporting projects worth between $3 billion and $5 billion posting $20 million losses from weekly delays. Embedded ever-deeper in frontier nations amid resource depletion, moreover, the true price for community conflicts is increasingly impossible to calculate – not least after production resumes at major operations.
Recognized as crucial to risk, reputation, access to capital and, increasingly, financial performance, sustainability is no stranger to the mainstream – with 72 percent of the S&P 500 and trillions of “responsibly-managed” assets in agreement. In mining, one of the world’s most balance-sheet driven, upstream sectors, meanwhile, the cost-benefit is often far less clear – yielding a unique opening for impact investors and others attuned to shared value in a circular economy.
On a planet hosting more than 2,000 mechanized mines, “writ-large” potential lies in the balance, according to people like Gavin Power, deputy director of the United Nations Global Compact, a partner to the U.N. Principles for Responsible Investment (UNPRI) which represents more than $34 trillion in assets under management.
“The industry has an historic opportunity to be the solution to global problems,” he said. “It covers labor, the environment, anti-corruption; it’s all-encompassing” – as are the UNPRI’s 1,250 signatories which represent 20 percent of global capital markets.
With its massive gold and platinum reserves – and more than 90 major protests over basic services through 2014 – South Africa provides an ecosystem of case studies. Top miner Anglo American, for one, has transformed operations wastewater into potable water for 80,000 villagers east of Johannesburg in a reverse-osmosis project now doubling in size – and being replicated nearby by giants BHP Billiton and Glencore. Other local Anglo initiatives address poverty through business grants in addition to HIV/AIDS prevention and treatment.
Participation by non-traditional investors in such endeavors is emblematic of a true triple bottom line: ensuring lasting positive impacts and maintenance of a social license to operate – ahead of a resurgence in commodities growth. Despite a weak global economy and a stockpiling of metals on the Chinese mainland, prospects for mining have seldom been better for long-term investors – and economic inclusiveness at its best.
Social impact entrepreneurs, whose cross-industry activities advance social performance before financial returns, can make a decisive difference. “Your company may be the first into a market where structures are weak, talent scarce and customers suspicious – while your trial-and-error may develop health care providers that can touch tens of millions of lives,” Matt Bannick, managing partner of Omidyar Network, wrote in the Stanford Social Innovation Review.
Corporate social responsibility (CSR) in mineral extraction itself is relatively new – even newer is the risk mitigation that drives institutional investment decisions, particularly among larger European banks, insurers and pension funds. Yet despite its dire need, systematic, proactive financial engagement remains elusive – even as successful examples abound worldwide.
As a nation, Chile, the world’s leading copper producer, is an innovator: In 2011, for instance, Santiago’s Mining Ministry joined 250 Chilean businesses to transforming them into world-class suppliers. Through $54 billion in investment, the World Bank now forecasts the 709,000 jobs servicing and supplying the mining industry to grow “substantially” – generating across-the-board prosperity any financier could wish for.
Owing to its vast mining industry, Chile is further energizing extractive firms across the continent – and Africa, Australia and beyond – to economize through renewable power. Here, too, opportunities for synergy are limitless – especially given the recent announcement of a global investor coalition committing $600 billion to carbon tracking and reduction by December.
One of the biggest challenges to aligning mining with the impact investing community in institutional terms is purely practical: In recent years, sustainability reporting has made impressive progress, yet beyond voluntary frameworks, categorically concrete and enforceable benchmarks remain elusive – despite extensive global efforts.
But the greatest gap is a socio-cultural one. Impact investors and miners inhabit separate worlds: One is often high-profile and cause-focused with deep commitments to change; miners, on the other hand, are introverted, hardworking and usually stubborn – their data-driven calculations, often bound by convention and legacy, lie almost exclusively below ground.
Yet both are united where it matters most – by a relentless, can-do attitude. And while standards and metrics mature, possibilities stand to resonate amid undeniably cyclical opportunities – and prospects for investment-driven change by the mining sector continues to swell.
Source: Triple Pundit
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The Chamber of Mines of South Africa has welcomed government’s plans to revitalise distressed mining towns in the country, as announced by President Jacob Zuma during his State of the Nation Address.
“We believe that the industry can better assist government when infrastructure and basic services planning is a shared responsibility so that we begin to see the critical mass change in so far as addressing human settlement and other community needs,” said Vice President of the chamber, Khanyisile Kweyama.
On Thursday night, President Zuma announced that government had ring-fenced a total of R2.1 billion to revitalise distressed mining towns with R290 million having being approved for informal settlement upgrading in Mpumalanga, North West, Gauteng, Northern Cape, Limpopo and the Free State.
The Chamber of Mines said its member companies were implementing the Municipal Capacity Building Project which seeks to assist municipalities within mining provinces with scarce skills that were needed for better planning and project implementation.
The chamber was also pleased with government’s intention to fast track the establishment of the Mining LAB for the country.
“This initiative is a demonstration that indeed we are over talk shops but more focused on collective actioned premised on sound economic and administrative decisions and actions that can drive investment, growth and transformation in mining,” said Chief Operating Officer of the Chamber of Mines, Roger Baxter.
Baxter said the chamber was focused on working at a leadership level with government and other stakeholders to promote transformative change to grow investment in the mining sector.
“We are pleased by the pronouncements but we would like to hear more about what will be done on Eskom in the medium term so that that business gains the confidence that its production schedules will not be compromised,” said President of the Chamber of Mines, Mike Teke.
The Chamber said the mining industry was already playing a key role in electricity load reduction and was committed to working with government on sustainable solution, which included the supply from the Grand Inga Project.
“It is critically important for the mining sector and country that we drive collective solutions that restore Eskom’s reserve margin and builds competitive, stable and available electricity supply for the country in the medium and longer term,” the Chamber of Mines said.
The Chamber of Mines has appointed experts who will represent its members in dealing with illegal mining.
“This is a scourge and poses an intrinsic risk to companies, employees and the economy. From a safety point of view as companies we need to guarantee our workforce that these rouge elements will not put them at risk as they go on with their daily work and we have had to increase security measures,” said the second Vice President of the chamber and champion for the elimination of fatalities task team, Graham Briggs.
Source: All Africa
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More than 900 mining corporates will be attending the 21st annual Investing in African Mining Indaba, where chief executives representing some of Africa’s most attractive mining companies will speak about the sector, where it is at present, its future, and mining and sustainable development.
“For more than 20 years, Africa’s mining companies have played a pivotal role in the success and growth of the Investing in African Mining Indaba; in fact, it is viewed as an investment barometer that generates significant media interest and business news coverage globally,” says Jonathan Moore, the managing director of the indaba.”In bringing Africa’s top mining leaders, we showcase all of Africa’s attractive mining investment opportunities to global investors seeking to invest in new projects and regions on the continent.
“The indaba takes place at the Cape Town International Convention Centre, from 9 to 12 February. There will be more than 50 corporate mining presentations featuring chief executives and board level representatives at the indaba and its complementary conference, the Investment Discovery Forum, which takes place in Cape Town on 8 and 9 February, before the conference gets under way.They will be addressing the status of current and new projects, overall corporate initiatives and other key issues that investors want to hear from the captains of the African mining industry.Chief executives that will be making presentations over the four days include:
- Tom Albanese, Vedanta;
- Graham Briggs, Harmony Gold;
- Mark Bristow, Randgold Resources;
- Alan Davies, Rio Tinto;
- William Dawes, Mkango Resources;
- Robert Friedland, Ivanhoe Mines;
- Brad Gordon, Acacia Mining;
- Chris Griffiths, Anglo American Platinum;
- R Michael Jones, Platinum Group Metals;
- Ben Magara, Lonmin;
- Bruce McFadzean, Mawson West;
- Christian de Saint-Rome, Copperzone Resources;
- Mike Schmidt, African Rainbow Minerals;
- John Simpson, Peninsula Minerals;
- John Sisay, Sierra Rutile;
- Sylvie St-Jean, Ambatovy;
- Paul Thomson, A-Cap Resources;
- Srinivasan Venkatakrishnan (Venkat), Anglogold Ashanti;
- Neil Woodyer, Endeavour Mining Corporation; and
- Nikolai Zelenski, Nordgold.
The annual Investing in African Mining Indaba, now in its 21st year, is the world’s preferred brand and destination in African mining. This year it is better positioned than ever to deliver an unparalleled deal-making and discovery platform for global investors and African mining companies, according to the organisers.The conference provides a diverse and proven platform that gives all delegates – investors, financiers, mining executives, government officials, and other industry stakeholders – exceptional access to compelling investments across the entire continent.The Mining Indaba, as it is known, is dedicated to the capitalisation and development of mining interests in Africa. It is the world’s largest mining investment conference and Africa’s largest mining event. For two decades, it has served as the pathway for foreign investments into Africa’s mining value chain – opportunities ranging from small diamond deposits to mega coal projects. It is now part of Euromoney Institutional Investor.
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