South African diamond giant De Beers warned on Monday the country’s proposed minerals law could put R8,5-billion in investment at risk because it threatened mining companies’ security of tenure.
De Beers said the draft Mineral and Petroleum Development Bill could influence pending decisions on two major expansion projects — a R1,5-billion investment at the Finsch mine in Northern Cape and a seven billion rand investment in the De Beers Premier mine east of Pretoria.
De Beers director Jonathan Oppenheimer told reporters on the sidelines of a parliamentary hearing on the draft law that De Beers would not be able to decide whether to go ahead until the legislation was finalised.
”De Beers has approved the technical feasibility studies for both (projects),” Oppenheimer said.
”The commercial go-ahead for those projects depends on our capacity to understand the environment that we will operate in during the life of those investments.
”With the Bill as it is right now, it is very difficult to understand the future environment we will operate in,” he said.
He said De Beers would have to decide on the larger Premier project within a year to 18 months, but he added: ”At Finsch, our project timeline is very, very tight and our capacity to delay without putting the mine itself at risk is limited.”
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The bill proposes to shift mineral rights from private hands to state ownership and provides for the award of mining licences for renewable periods of 30 years. Critics in the industry say it allows a large amount of discretion to government officials in interpreting miners’ rights and obligations.
”Inconsistencies (in the bill) could present impediments to investment and large-scale development of the mining industry in South Africa,” said Oppenheimer, who is a son of De Beers Chairman Nicky Oppenheimer.
The bill is intended by the government to open the industry to participation by black investors marginalised under three centuries of white domination.
Miners have urged in three volumes of submissions to the parliamentary committee that existing rights should be protected and that investors should be assured of rights for the life of a mine, which could extend over a century.
De Beers and other miners also have complained that the draft makes provision for new levies and royalties, but gives no hint of the magnitude of these payments, which would be determined in a separate Treasury bill.
”Investments of this magnitude mean that if foreign or local investors are to pledge their funds…then the political and business climate must be attractive over the long term,” Oppenheimer said.
De Beers, which is 45% owned by mining giant Anglo American Plc, said in a memorandum submitted by Oppenheimer that a key concern was ”the security of tenure or bankability in relation to large mines currently in production and to proposed significant capital expenditure”.
The Finsch and Premier investments would together provide 60 000 man-years of employment, the company said.
It said the projects would go ahead only if ”the De Beers Board of Directors is persuaded that there is sufficient security of tenure…”
”It is important to appreciate that if the aforementioned capital expansion costs cannot be approved…the relevant mines will shortly be mined out…and mine closure would be inevitable,” the company said.
Oppenheimer said the De Beers fully supported plans to expand participation in mining to blacks and other groups disadvantaged under apartheid, but said this should include employment and sub-contracting and not only ownership.
Blacks were denied access to mine ownership and to any but the most menial of mining jobs under white rule, which ended in 1994.
The minerals bill, which already has been substantially rewritten after industry criticism of a first draft, seeks to break the white stranglehold on mining rights and to set targets for the recruitment of blacks into all levels of the industry, from management to ownership and service provision. –
Reuters