Diversified global miner South32 has no interest in investing in growth options in SA outside its Klipspruit extension programme because of the deepening regulatory uncertainty and the "depressing" interaction with the government, says CEO Graham Kerr.
South32, a R158bn company, hauled the Department of Mineral Resources to court in August to secure an extension to its mining right at its Klipspruit Colliery after a delay of about two years. The court granted the amendment to the mining right, putting South32 in a position to make the $265m investment decision in the first half of its 2018 financial year. Klipspruit’s life extension is South32’s main capital project.
Kerr, who headed the cash-flush assets spun off from BHP Billiton, said that at a time when the country needed fresh investment the uncertain regulatory environment, compounded by the release and subsequent suspension of the third iteration of the Mining Charter (subject to a court battle), and fiscal regime were counting against inflows.
"There would be things hypothetically that we could look at in SA. We like manganese and we have the world’s largest basin which is largely unconsolidated. In the coal-energy space, SA is well positioned to feed some developing economies like India and Morocco. It will have a strong domestic market, needing additional tonnes for Eskom in the future," said Kerr.
"The problem is that none of those things would attract our interest because of some of that uncertainty," he said.
"The uncertainty around the Mining Charter, issues around corruption and uncertainty around the next ANC leader would weigh down on any board looking to make a substantial new investment ... because in the mining space you are making large investments covering many years and you need fiscal and policy stability to make it attractive," he said.
Anglo American has cut its exposure to Eskom, selling its thermal coal mines that supply the utility.
Eskom’s demand for 51% black ownership for its suppliers led to delays in triggering the New Largo colliery and contributed to Anglo’s decision not to be a minority partner in SA’s coal assets.
Mining companies’ frustrations in dealing with the department have resulted in a number of high-profile court cases, all of which have gone against the regulator. The latest matter entails the Chamber of Mines’ attempt to secure an interdict to stop the implementation of the third Mining Charter, gazetted in mid-June, and then to have the document judicially reviewed.
Anglo had embarked on a extensive portfolio restructuring and sales to tackle its $13bn debt. After a number of asset sales and a favourable pricing environment, Anglo has cooled talk of selling its stakes in Kumba Iron Ore, export-focused coal mines in SA as well as its minority stake in a manganese joint venture with South32 in SA.
Asked about the status of the Anglo stake, Kerr said South32 would like to buy Anglo’s 40% share in the Samancor joint venture, but it appeared a sale was no longer such a pressing issue.
"It’s our systems and processes, our people. We control 100% of the marketing rights, so for us to buy their share, we’d only do it if we saw value in it."
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