South Africa's contentious mining law update, which increased mandatory black ownership, management participation and suppliers has been suspended, the country’s Chamber of Mines said on Friday, July 14.
The new Mining Charter was introduced last month to the shock of the industry, which had not been consulted in its creation. Among the provisions were an increase of black ownership from 26% to 30%, and at least 70% of all suppliers were to be from black-owned firms.
In response, the chamber has applied for a court interdict against the Department of Mineral Resources (DMR) to have the charter set aside. Chamber CEO Roger Baxter said on Friday the DMR had agreed to suspend the charter pending a court hearing originally scheduled for July 18.
In return for suspending the new charter, the DMR asked the chamber to suspend the original urgent court application and instead, schedule a hearing at a later date. In essence, the DMR likely fears it will lose in court and its lawyers advise asking for more time to prepare a case.
Should the DMR attempt to enforce the new rules, the chamber will reinstate its urgent application.
“This is a satisfactory arrangement for the chamber and the industry, whose primary objective through the interdict application remains to ensure that the DMR’s charter does not come into effect, pending a court application to have it reviewed and set aside,” Baxter said.
The charter has already rocked an industry struggling with mounting costs. In July, Sibanye Gold, South Africa’s biggest gold miner, revealed that senior executives were in Los Angeles in the final stages of a road show with U.S. bond fund managers when the new charter was announced.
Sibanye is in the process of the $2.2 billion acquisition of Stillwater Mining in the U.S. Due to the unexpected announcement of the charter, the deal was thrown into jeopardy.
“We had to hold back the financing, find out what the charter meant and rebrief all our potential investors," CEO Neal Froneman said, quoted in Business Day. "A number of institutional investors pulled out of the bond process, saying the risks in SA were just too high and it’s becoming uninvestable.”
Sibanye managed to finance the deal, but has to pay an extra $5 million premium on its borrowings, Froneman said.