Anglo mining rights under threat

Mineral resources minister Susan Shabangu has promised to subject the “entire Anglo American portfolio of mining rights to regulatory scrutiny” following the decision by Anglo Platinum to place its Rustenburg operations on long-term care and maintenance, with a potential loss of 14,000 jobs.

This will trim its annual production by roughly a fifth, or 400,000 ounces.

The government accused Anglo Platinum of bad faith, having informed it of the cuts just seven days prior to making the announcement. “The department (of Mineral and Energy Resources) regrets the behaviour by Anglo American on how the company relates and undermines the regulator on such important business decisions which impact the country’s economy,” noted the minister in response to the Anglo Platinum announcement.

This pretty much sums up the extent of the love between mining companies and government at present. After the wildcat Marikana strike last year, where 44 miners were gunned down by police, the South African mining sector has been placed on red alert by international investors.

Alarm buttons have been pressed across the mining sector. Goldfields recently announced that it was splitting its South African assets – with the exception of South Deep – into a new vehicle called Sibanye Gold, leaving the more profitable and less risky non-South African assets (including South Deep) under Goldfields. The group’s chief financial officer Paul Schmidt last year suggested that based on current trends, the SA mining sector had possibly five years of life left in it.

Of course, there are many reasons for this, not just labour turbulence. Mining chiefs cite rising fixed costs, fiscal uncertainty and regulatory strangulation as just some of the causes behind the decline of the sector.

Anglo Platinum says its decision to mothball its two Rustenburg mines  – Khuseleka and Khomanani – is not a knee-jerk reaction to the deteriorating labour scene on the mines. "The company has to take these drastic and significant actions to save the company and the employment of an additional 45,000 people," says Anglo Platinum chief executive, Chris Griffith.

The government replies that this amounts to a complex form of minerals hoarding that will “deprive the country of economic growth and workers of their livelihoods.”

Anglo Platinum’s “old order” mining rights were converted to “new order” rights in 2010 and were granted for a period of 30 years on the strength of four mining works programmes (MWPs) presented by the group’s management.

“Anglo American Platinum imposed large scale retrenchments in 2009 and today’s announcement seems to present a pattern of unsustainable business decisions linked to change of leadership in the company,” said Shabangu.

She also accused the company of lack of vision and long-term business planning, as well as omitting to invest in the future sustainable development of the mine.

Webber Wentzel partner Peter Leon is reported in Business Day as saying Shabangu's initial reaction to the Amplats restructuring was "unhelpful, emotional and regrettable".

"If you look at the Department of Mineral Resources' response to Amplats this week, and what happened in relation to the mining industry post-Marikana, which was pretty much dead silence, it all rings rather hollow," Leon is quoted as saying.

According to the same report, labour analyst Loane Sharp says Shabangu must "pull herself together" and realise that a dramatic turnaround from government is needed to avoid more job losses. "Government has stumbled from crisis to crisis without paying attention to the possibility that they might have caused the problems we observe in mining. The real casualty of government policy and attitude is mining employment."

According to Sharp, mining employment fell from 1.2-million jobs in 1994 to 523,000 in 2012, largely because of government-induced investment uncertainties in the mining sector.

Bowman Gilfillan partner in the area of regulatory practice, Claire Tucker, argues that there is a precedent for the threatened cancellation of the Anglo Platinum mining rights.

“In September 2011 South African Mineral Resources Minister Susan Shabangu cancelled the mining rights of Johannesburg and London-listed Central Rand Gold (CRG),” wrote Tucker in a recent article. “The circumstances of the cancellation had a similar basis to the action which the Minister has threatened to take against Anglo Platinum Limited. Six months prior to the purported cancellation of CRG’s right, CRG had halted underground mining because of a flood risk. The company was accused of contravening the mining laws because it did not implement its mining work programme (MWP), and failed to meet social and labour plans (SLP). CRG took the decision on review to the High Court on an urgent basis. The Minister agreed to the temporary suspension of the decision and ultimately did not challenge the review which resulted in the decision to cancel being set aside by the High Court in December 2011.

“As such, there is clear precedent for the Minister’s using her powers to enforce the mining work programme and social and labour plan commitments which are incorporated into the mining right itself to ensure resources are 'optimally exploited'. A mining rights holder is obliged in terms of section 25(2) for the duration of the mining right to “actively conduct mining in accordance with the MWP.” 

The MWP, drawn up by an applicant for a mining right, describes how the holder intends going about exploitation of the resource. At a basic level it is drawn up taking into account factors such as the location and composition of the resource and what is financially feasible and viable for its exploitation. If there are downturns in the price of the mineral mined or other factors which make mining in a particular way or at a particular rate less feasible, the holder would be entitled to apply for the amendment of the MWP. The minister would have to reasonably consider any such request, which would be made in terms of section 102 of the MPRDA.

Section 52 of the MPRDA gives the minister further powers in the case of a scaling back in mining operations, says Tucker.

“This section provides that the holder of a mining right must, after consultation with any relevant trade union notify the Minerals and Mining Development Board if any mining operation is to be scaled down or to cease with the possible effect that 10% or more of the labour forceor more than 500 employees, are likely to be retrenched in any 12 month period. There is a similar requirement where the mine is no longer profitable.”

The Board must consult and investigate the matter particularly the socio-economic and labour implications thereof and make recommendations to the Minister. The minister may, then direct the holder of the mining right take such corrective measures subject to such terms and conditions as the Minister may determine.

If the directives are not complied with, the Minister can apply to a court for judicial management of the mining operation.

This section does not give the minister the direct power to cancel the mining right. Such a power would flow from the enforcement provisions discussed above. If a person fails to comply with the mining right, and particularly the MWP and SLP, the minister may cancel a mining right, but only after a full notice and comment period has been followed.  Any such decision would have to take into account the realities facing the miner and would have to be fairly and reasonably taken. Any such decision could be taken on review to the High Court, concludes Tucker.