The sheer number of suits attending the mining indaba this year makes one thing clear — the world wants minerals, particularly those beneath African soil.
During the week more than 4 000 dark blue and black jackets hailing from across the globe spilled out of the Cape Town International Convention Centre into the swankiest venues around the city, from Camps Bay to Vergelegen Wine estate, to network, cut deals and strategise.
It would perhaps be unfair to say avarice underlaid every conversation whispered in corridors and at dinner tables, but the smell of money was thick in the air. Although the appetite for metals and minerals appears to be returning steadily to pre-financial crisis levels, there are issues that, as one executive put it, ‘rest at the back of people’s minds”, which arguably took the edge off that corporate hunger.
These included concerns about regulatory problems, infrastructure and, of course, that hot potato — nationalisation. South Africa’s department of mineral resources worked very hard during the week to outline the work it has done to overhaul its licensing system and play down the calls for nationalisation emanating from the ANC Youth League.
The department’s old, overloaded and human-heavy licensing system in part contributed to the battle now being fought between the department and Anglo’s Kumba Iron Ore. Kumba is challenging the department’s decision to award part of the rights to its Sishen Iron Ore mine to little-known, politically connected start-up operation Imperial Crown Trading.
An audit into prospecting and mining rights awarded since the introduction of the Mineral and Petroleum Resources Development Act revealed the extent of the problem. Although about 26 000 rights applications have been processed by the department since 2004, 122 cases of duplicate rights awards were found and many rights were granted despite incomplete applications and failure to comply with environmental requirements.
Prospecting rights into mining rights
Susan Shabangu, the minister of mineral resources, also pointed to the failure of many companies to convert their prospecting rights into mining rights. As a result the department has issued 511 notices to companies indicating its intentions to investigate their operations, and 315 have had their rights suspended.
As part of its regulatory overhaul, the department has also moved to review the Act to address grey areas or loopholes in the legislation. The review proposal will be submitted to the Cabinet by April, according to Shabangu, after which it will go to Parliament to be amended. The process is expected to be completed by the end of the year.
Mining companies have welcomed the government’s move to address long existent problems, but the spectre of nationalisation refuses to die despite attempts by the government to play the matter down. On Tuesday Shabangu told the press that nationalisation was not government policy and that the ANC had undertaken to investigate the issue before a decision was taken. But she followed this with a statement saying that she was convinced that it was not an option.
Her comments came after Anglo-American chief executive Cynthia Carroll’s outright attack on the notion during her opening address to the conference. Carroll described the proponents of the idea as ‘false prophets” and said nationalisation was a ‘road to ruin”.
Andile Sangqu, the executive director for Xstrata South Africa, said that the nationalisation debate should be viewed in the context of increased calls from communities for a ‘different model of how business and government should engage with the socioeconomic issues affecting communities”. He said that with the advent of the revised mining charter, completed last year, better interaction between communities and mining houses could reduce the call for alternatives like nationalisation.
Also of concern to the miners was energy provision, with Eskom’s continued warnings about power supply this year. Many mines including Xstrata are looking to supply their own power. This was a ‘strategic response” to mitigate energy supply and pricing problems, Sangqu said, and would go ‘some distance to lift the pressure off Eskom”.
The company’s ferrochrome smelting business would be fed by a 300MW power plant fuelled by discarded coal, although it was not intended to meet all its demands, according to Sangqu. It would also require access to Eskom’s distribution network, the details of which had yet to be ironed out.
Also causing concern have been the questions raised by Eskom in recent weeks about the security of long-term coal supplies to meet the needs of its power stations. It has argued that, under current regulations, it is not clear whether the market could provide an optimal balance between coal exports and domestic supply.
Dan Marokane, Eskom’s chief commercial officer, in a presentation made to the McCloskey South African Coal Exports Conference in late January, said that a ‘comprehensive policy framework will be needed if South Africa is to find a balance between exports and domestic energy security that provides sustainable and affordable electricity for all”.
Options such as supply quotas attached to newly awarded licences and restrictions on low-grade coal exports have been mooted. Eskom was also reported to be looking at price issues and a ban of low-grade thermal coal exports from 2014 to preserve it for domestic use. But these suggestions have drawn widespread criticism from coal-mining companies and entities such as the Chamber of Mines.