Mining Indaba: Susan Shabangu misses chance to allay investor fears

2014-02-05 11:54

Some delegates were disappointed by Mineral Resources Minister Susan Shabangu who, in her opening address at the country’s Mining Indaba, made no attempt to bolster the dwindling prestige of the mining industry.

Many delegates hoped Shabangu would clear up the uncertainty of the implications of declaring certain minerals to be strategic minerals, but nothing came of it.

The legislation makes provision for strategic minerals – coal almost certainly one of them – to be declared strategic minerals. Mining companies will then have to obtain Shabangu’s approval before they can export any coal.

She will also be given the authority to require that a percentage of the production of “designated minerals” be sold to local processors at prices determined by Shabangu as the minister “on the basis of a value chain”.

“We do not expect mining companies to make bottles or laptops, but unprocessed minerals that are exported deprive us of the opportunity to create jobs. We will try along with the industry to promote development,” she said in answer to questions about this yesterday.

Legal experts say the wording of the legislation provides for the mandatory supply of minerals at “cost plus” contracts – the same way in which Eskom has for decades bought coal at designated collieries.

However, this discourages new investments in the development of coal mines, while Eskom is facing an enormous shortage of coal after 2018. The electricity giant consumes about 170 million tons of coal per year, but must find new sources for about 40% of its coal needs after 2018 because the mines in Mpumalanga are becoming depleted.

“She spoke superficially about this and said nothing about the finer details of the legislation that investors are extremely worried about. I think she allowed a wonderful opportunity to slip through her fingers where she could’ve allayed investors’ fears,” said one of the country’s leading mining investment consultants, who declined to be named.

Shabangu appeared indifferent to the strike that has brought the country’s struggling platinum mines to a standstill and said it was the workers’ constitutional right to strike. “The government has already shown decisive leadership to restore peace and order in the mining industry,” she said.

Chamber of Mines economist Roger Baxter said during a panel discussion about 40% of the mines where there are strikes are loss-making or are earning marginal profits.

- Sake24

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