Resources Minister Ngoako Ramatlhodi addresses a media briefing at the Mining Indaba in Cape Town on Tuesday.  Picture: TREVOR SAMSON
Resources Minister Ngoako Ramatlhodi addresses a media briefing at the Mining Indaba in Cape Town on Tuesday. Picture: TREVOR SAMSON

ONE of the key areas of disagreement which the Chamber of Mines thought it had resolved with the government in a bill amending mining laws has been reopened, bringing added uncertainty and a potentially crippling threat to the South African mining industry.

One of many points of friction the chamber identified in the Mineral and Petroleum Resources Development Amendment Bill was the plan for the beneficiation of minerals and the ability of the Mineral Resources Minister Ngoako Ramatlhodi to designate some minerals as strategic and order that they be sold at set prices to stimulate SA’s industrial sector.

After much debate and lobbying by the industry an agreement was reached that this price would be a "mine gate price". This is essentially an export parity price less transport, meaning mining companies retain a profit margin but local manufacturers pay less than the global price for various commodities.

This agreement did not extend to precious metals such as gold and platinum, which would be priced at prevailing international prices.

But it emerged on Tuesday that the Department of Trade and Industry has put pressure on the Department of Mineral Resources to change the wording of the bill. The bill has been referred back to parliament by President Jacob Zuma to address constitutional concerns.

"In the current draft, the developmental price is set at the mine gate price and this is being contested vigorously," Mr Ramatlhodi said in a speech at the Mining Indaba in Cape Town on Tuesday.

He later explained that he wanted the issue to be resolved to prevent the revised bill being enacted only to be challenged later, extending regulatory uncertainty. Mr Ramatlhodi wanted the bill to be tested in the Constitutional Court to see if the provisions to cater for mineral beneficiation violated SA’s treaties under the World Trade Organisation.

He backtracked from comments made just two weeks ago that he wanted the revised bill to be enacted by June, saying he would rather delay the process by a number of months by "lancing the boil" to achieve absolute certainty around these kinds of provisions between all interested parties, rather than have to continually fight legal battles around them and make further amendments.

The department wants developmental pricing, which is lower than the mine gate price, and to compel producers of precious metals to sell at reduced prices.

Mr Ramatlhodi has said in various public platforms such as Davos that he wants to honour the spirit of the agreement reached with the mining industry in reaching a compromise agreement on the bill.

Chamber of Mines chief operating officer Roger Baxter said developmental pricing would be a deal-breaker for mining companies.

"A developmental price implying a less than market-related price for metals sold into the domestic market is a deal-breaking issue for the mining industry," he said.

"It is a substantive issue because it implies mining companies will be forced to subsidise downstream manufacturing companies and if the government thinks mining companies can do this then they haven’t done enough work in understanding the business of mining or manufacturing," he said.

"Developmental pricing will break the back of the South African mining industry for no benefit downstream because the Department of Trade and Industry needs to start looking at all the conventional measures that should be applied to promote investment and manufacturing. It should not expect one industry to subsidise another. It’s against sound economic principles and it will end up killing the mining industry for no benefit to the country."

Deloitte Africa mining leader Andrew Lane said the department should focus on setting up special economic zones and tax and duty incentives to stimulate the industry rather than insisting on measures that had unintended consequences for the mining sector.

Asked whether Mr Ramatlhodi was perhaps playing a political game with the industry, Webber Wentzel mining lawyer Peter Leon said: "You have to take things at face value. I think he’s trying and he does appear to be genuine, otherwise he’ll have a credibility problem if the things he’s saying are reversed in six months’ time."

Mr Ramatlhodi once again raised the concept of a national mining champion, which had broad community and employee involvement and would buy the mining assets disposed of by larger mining companies. His lack of detail on the concept left many indaba delegates puzzled about who would own such an entity and how it would be funded.

"I’m a bit confused about what they’re up to there," Mr Leon said, echoing the most commonly heard refrain from people quizzed about what they thought the establishment of the national champion meant, with many pointing out that large, diversified, black-owned mining companies already existed in the form of Exxaro Resources and African Rainbow Minerals.

While the details were frustratingly vague, Mr Ramatlhodi sent a very clear message on the government’s view of empowerment, a controversial process in the mining sector which has since 1994 created a small number of incredibly wealth individuals benefiting from the laws governing the transformation of the sector by obliging mining companies to be 26% owned by black South Africans by the end of 2014.

"The era of individual empowerment is gone," Mr Ramatlhodi said.