The ‘revolutionary’ mining charter that was announced by the mineral resources minister, Mosebenzi Zwane introducing a new stringent law forcing mining companies to ensure that within 12 months, there will be minimum of 30 percent black ownership. He also announced that there would be a minimum of 50 plus one for mining prospecting rights, while companies would have to give workers 8 percent of their shares. The shock announcement, saw the rand falling 2.1 percent against the dollar and mining stocks plunge on the Johannesburg Stock Exchange on Thursday.
No Turning Back
Zwane said there is no turning back, the minerals of the people in this country will be shared among the people of South Africa, the button has been pressed and the Charter is being gazetted.
The rand was trading at 12.8775 and was the biggest decliner among 31 major currencies.
While mining stocks for mining companies saw R30BN shaved off their combined market capitalization:
• Sibanye Gold shed 7.8 percent
• Kumba Iron Ore fell 6.4 percent
• Assore shed 5.85 percent
• Anglo American Plc dipped 6 percent
• AngloGold Ashanti plunged 6.2 percent
• The industrial metals index fell to an eight month low falling 4.6 percent
• Mining gauge fell 3.2 percent while the broader benchmark fell 1.4 percent
According to Avior Capital Markets, the two biggest gold miners, AngloGold and Sibanye will be affected by the new rules together with Glencore Plc, Impala Platinum Holdings, South32 and Kumba Iron Ore all of whom are owned by Anglo.
An economist at Nomura International in London, Peter Attard Montalto forecasts that the rand will be at 15.5 per dollar by the year-end, the negative reforms will set the country back with negative growth and investment in the industry.
Existing rules that were set for mining companies was at 26 percent, with many black investors having already sold out. The representative of the mining companies in South Africa, The Chamber of Mines said that they had not been consulted and would seek a court order to stop implementation of the new framework.
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