The past 12 months have not been good ones for the mining industry. The strong rand continued to bite into profit margins and new mining legislation - which came into effect in May last year - is the cause of rising tension between the industry and government.
Some problems were expected from the legislation's vagueness, which mining industry executives had objected to all along. It was only after the bill had been safely approved by parliament that officials publicly acknowledged the vagueness and sought to justify it.
Minerals & energy minister Phumzile Mlambo-Ngcuka said (Companies, August 27): "The issue of flexibility in the new act is crucial to ensure that any stupid mistake that might have occurred in the drafting of the legislation can be rectified."
Mlambo-Ngcuka was replying to questions over the damage being done to SA's investment image among foreign investors concerned about the perceived rising risk of developing mines here.
Her mood at the time seemed unsympathetic: "Foreign investors have a responsibility to spend the time required to understand what we are trying to do here," she said.
That is not happening, judging by this year's ResourceStocks World Risk Survey. It ranked SA 21st out of 25 countries, as measured by perceived risk of investing in the mining industry. The survey ranked Australia and Canada first and second; Botswana came third and the US fifth. Tanzania at 8th and Zambia at 18th underscore just how low SA is being rated.
Director-general Sandile Nogxina made a plea for understanding and some leeway (Companies February 18 and March 25) when he said: "People must bear with us. Applicants are coming up with interpretations of the new legislation that change it from what was intended . . . We don't have a problem with capacity in the department. The problem is in interpretation of the legislation, which is slowing down the process."
Nogxina was replying specifically to complaints about inefficiency in the Kimberley regional office of the department of minerals & energy (DME).
Allegations are that approval of new prospecting applications through Kimberley are being delayed for up to 18 months. The new act came into force on May 1 last year, but by April this year only two new prospecting permits had been issued.
Whatever the reasons, the result is a growing disenchantment among junior mining companies and exploration operators. These are the sectors of the SA mining business that government wants to stimulate.
The situation is being exploited by countries such as Botswana, Tanzania, Zambia and even that former "heart of darkness" - the Democratic Republic of Congo (DRC) - where it is easier to acquire prospecting permits thanit is in SA.
According to experienced exploration geologist John Bristow - who has been involved in prospecting in SA for decades but now runs a diamond exploration programme in Botswana - the permit process is more efficient in Botswana. He describes the SA situation as "too complicated and confused".
What is making things worse is that government seems to be taking criticism of the new legislation personally. The most famous incident involved President Thabo Mbeki's public broadside at Anglo American CEO Tony Trahar, in response to comments by Trahar on investment risk in SA. The comments were actually favourable towards the country when taken in context.
It emerged again when about 3 000 mineral rights owners, including big mining companies such as Xstrata, Lonmin and Impala Platinum, took action to protect their legal standing over compensation in the unlikely event that they lost their mining rights.
That stemmed from a legal interpretation that owners of mining and prospecting rights had to give notice before October 31 last year that they would claim compensation should they lose their rights. If they did not give such notice, they risked losing their right to claim.
It is unlikely such legal action will take place, because the widespread assumption is that the mining rights will be converted. Mlambo-Ngcuka said government would not resort to using the legislation.
But many mining companies maintained they still had to give notice, otherwise they would be failing in their fiduciary duties to protect the interests of shareholders.
One was Aquarius Platinum, which shortly thereafter held a party to celebrate its successful black economic empowerment (BEE) deal, concluded after a year of negotiation and fund raising. Mlambo-Ngcuka was to be the keynote speaker. She cancelled at the last minute and no-one from the DME attended the function.
On the brighter side is that the first two conversions of mining rights for major mines were granted in November for Harmony's Evander and Randfontein operations.
That was trumpeted by Harmony CEO Bernard Swanepoel as a sign that the system was working, but the early optimism seemed short-lived when AngloGold Ashanti ran into problems.
According to AngloGold Ashanti CEO Bobby Godsell, his group's application meets the legal requirements of the mining charter on BEE participation. According to Nogxina it does not.
Officially, mining executives remain positive about the process. President of the Chamber of Mines Con Fauconnier believes the "goodwill" exists to deal constructively with the problems the process is throwing up.
Unofficially, there's a lot of concern and gritted teeth. So far, only two companies have publicly thrown in the towel, citing problems with the new legislation. Listed Australian exploration company Argosy Minerals has quit a diamond joint venture and Canadian-listed Southern Era Diamonds has cut back on its diamond exploration in SA.
