South Africa toughens up its rules on black control of mines
Companies including Anglo American and Sibanye Gold dropped in value after South Africa increased the minimum black ownership requirement for local mines.
The country has set a 12-month deadline for compliance with the new rules.
The Department of Mineral Resources will raise the requirement from the current 26pc to ensure more proceeds from the country's natural resources flow to the black majority, Mining Minister Mosebenzi Zwane said yesterday in the capital, Pretoria.
The new minimum applies regardless of whether they have previously sold shares or assets to black investors that later divested.
Sibanye dropped 7.4pc at 12:58pm in Johannesburg, while Kumba was 6.2pc lower.
Anglo American, meanwhile, declined 6pc in London.
A holder who claims a historical transaction that achieved 26pc prior to the new Mining Charter, which Zwane presented yesterday, "must top up to 30pc", regardless of whether the earlier black shareholders still hold their position, according to a statement handed to reporters.
Most mining companies reached the 26pc level under previous versions of the charter but many of the black investors have since sold out.
The Chamber of Mines, which represents mining companies, has said it's willing to fight the government in court over the issue of getting credit from earlier deals, which it says would kill investment in the industry.
"The new charter is significantly worse for the mining industry than the original draft," Peter Leon, the Africa co- chair at Herbert Smith Freehills, said by phone yesterday.
"It's poorly considered and raises serious questions about the government's commitment to the protection of property rights."
Glencore, Impala Platinum, South32 and Kumba Iron Ore, which is majority owned by Anglo American, would need to sell the biggest stakes if the new charter fails to give credit for previous deals, Avior Capital Markets said.
AngloGold Ashanti and Sibanye, the country's two biggest gold miners, may also be affected by the new rules.
The charter will require companies to pay 1pc of annual revenue to communities and new prospecting rights will require black control, Minister Mosebenzi Zwane said. (Bloomberg)