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South Africa mining in the spotlight
February 3, 2014

Many of the world’s most influential mining leaders have gathered in Cape Town, South Africa for the annual Mining Indaba conference where many will be looking to help find stability for the industry in the mineral rich nation.

A new round of strikes was kicked off in January and the government and industry have been at odds recently over new regulations.
These are among the issues that have led the region to underperform when compared to other regions, such as Australia. But even with its problems, South Africa remains endowed with massive reserves of platinum, thermal coal, gold and manganese, which are critical to companies such Anglo American, Glencore Xstrata and AngloGold Ashanti.

Ahead of the conference, Susan Shabangu, South Africa’s mining minister told the Financial Times that the sector was “stabilizing,”, adding that the government had reached agreements in “many areas” of the legislation with the industry. “We are satisfied we have reached a consensus in all areas, including ministerial discretion.”

Shabangu was scheduled to deliver a keynote speech on in front of some 7,000 mining bosses, bankers, lawyers and others at the annual Mining Indaba conference – the biggest event of its kind in Africa.

Roger Baxter, a senior executive at the Chamber of Mines – which is heavily involved in the negotiations with the government – agreed that progress had been made on the regulatory front. “Our feeling is that we have resolved most of the issues,” he said.

Other executives said both sides had come a “long way” and were in a “much better place.” But they cautioned that some “delicate” discussions were still pending for all sides to be satisfied, the Financial Times reported.

The most contentious parts of the draft regulation relate to government’s efforts to support South Africa’s manufacturers. The government wants to give the Department of Mineral Resources discretion to force miners to sell a certain amount of a commodity for domestic use, and have the right to set the local price. Miners are worried they would sell their production locally at prices well below the international market, damaging their profitability.

Shabangu said the crucial issue now was about the terminology and phrasing used in the bill, adding that there would be “flexibility” and that no pricing would be set unilaterally.

“We were going to have broad principles . . . We’re saying let’s find a way which all parties can live with, but also which doesn’t stifle the future,” she said. “We are not targeting particular minerals; we are saying the markets will define that space.”

Baxter said the industry accepted the concept of discretionary powers, but added: “The issue is: are the discretionary powers reasonable and can they be guided by proper regulation.”
 

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