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WHAT are the chances Imperial Crown Trading (ICT) is awarded the right to mine its 21.4% share of Sishen Iron Ore Company (SIOC's) property? History tells us they're pretty high.
This affair reminds me of an initial criticism of mining legislation, which was to point out the government was both writer of the law and its arbiter. It framed the prospecting and mining permit legislation and has never been afraid of interpreting it.
SIOC's parent company, Kumba Iron Ore, has as much chance of defeating the will of the government as De Beers when the diamond producer was opposing state plans to alter the "London mix" so as to have some diamonds sorted in Johannesburg.
In both cases, government's interest is to stimulate the economy and create jobs. In hotly contested arbitration, De Beers now has to sell a portion of its diamonds to the local cutting and polishing industry first, at preferential prices, and then export the rest to London.
Similarly, Kumba Iron Ore must set aside a portion of its iron ore at heavily discounted prices for domestic user(s).
I have sympathy with the principle government has at heart but I'm critical, to say the least, of the methods which remain as hamfisted as ever.
According to Kumba Iron Ore's evidence, which was marshalled against ICT receiving a prospecting licence, there's evidence of possible fraud in ICT's application. That's because ICT uses documents that were part of Kumba's. How do we know? ICT's application poorly conceals the stamp of Kumba's master of deeds in supporting documentation.
You can't ignore, either, the fact that it's Anglo American which is getting it in the eye. As owner of De Beers and Kumba Iron Ore, Anglo embodies mining industry as legacy enemy to government and its leftist interests.
Winners and losers
So let's imagine ICT, in about five months' time, is awarded the right to mine a portion of the SIOC property. Who are the winners and losers?
ICT is the standout winner. As holder of 21.4% of SIOC's production, it's likely ArcelorMittal SA (Amsa) will complete its offer to buy ICT for R800m – an empowerment deal which only magnifies what's wrong with current mining legislation and gives firepower to the nationalisation advocates.
Amsa is the standout loser. Paying R800m is the cost of forgetting to renew its prospecting licence in 2009. Yet it will have all the political will in the world for getting that iron ore at cost plus 3% deal.
The government wants cheap iron ore. A source in the department of mineral resources (DMR) told Miningmx: "The government would like to create a number of steel companies in South Africa. We are an economy consuming a lot of steel. It's untenable that we’re importing (steel) at high prices”.
Kumba is a definite loser. It's back to square one and has spent valuable time and money fighting a lost cause.
South Africa is a loser, clearly. The government is shown to be corrupt in places, and hellbent on forcing through a social agenda; security of tenure is blown apart; and the country as a viable investment destination is further weakened.
Then there are the lawyers...
I have it on good authority that the Constitutional Court's decision to dissolve Genorah Resources' prospecting permit on the basis that it did not properly consult the Bengwenyama community's claim is causing the DMR a major headache.
Sandile Nogxina, director general of the DMR, spent part of the past week in KwaZulu-Natal, meeting with local communities who are fighting over the right to own certain coal properties in the region.
The message from the DMR is that activism over mineral rights will result in keeping the minerals in the ground longer than they should be - which doesn't create wealth for anyone. Better, he says, to negotiate a strong social and labour plan with the investors.
There's great irony in this, however.
If the goal of every black-owned empowerment company is to quickly flip mineral rights for gain, you can be sure there's another white-owned "advisory" firm, a veritable cottage industry of them, advising hitherto oblivous communities that they should seek to own mineable mineral rights in their district or environs.
Doubtless, legislation was required to liberate sterilised mineral rights held by South Africa's mining corporates. But the genie in the bottle is a malign scramble for wealth and gain.
- Fin24
