Pragmatic Platinum Clad Agreements Herald Future for Black Empowerment and South African Mining Industry

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Researched by Industrialinfo.com (Industrial Information Resources Incorporated; Houston, Texas). A combination of stakeholder contention and long term enlightened self interest in the center of the South African mining industry has finally produced agreements and a positive way forward for the government, black empowerment, and the mining companies.

In the inter group dialectics of South African power politics, those groups who are seen to be holding the high ground in mine ownership are at the same time seen to be true partners sharing the commanding heights of the economy. It was the same when the anglo dominated industry condoned and encouraged a larger opening into the industry for the under-dog Afrikaans group mining business interests. Mining in South Africa has potent dimensions as it concerns land rights, resources and globally significant wealth.

The department of minerals and energy has put in place 'use-it-or-lose' legislation designed to allow new empowerment companies to exploit mining opportunities where dormant or unexploited rights are held by traditionally white owned companies. There has also been contention on the quantified targeting of black advancement in the financial control of mining companies and the total mining sector over the next ten years.

New large, black controlled companies have raised their profile in mining action in the last two years and have been welcomed by the old order who have, at the same time, expressed strong reservations about any quota driven policies in the face of the need for massive, long term commercial investment and the maintenance of international investor confidence in the industry. There is also an increasing degree of 'colorless' team building at board, management, operational, and worker levels. Opinion leaders from all sections of the population are now deploring the tokenism of purely 'buying' into existing companies with highly leveraged and borrowed capital to provide excessive perks for a new black pseudo-elite. Eight years after 1994 there is a pervasive mood around the country that the fulfillment of the promise of economic upliftment from the bottom of society upwards should be given higher focus in empowerment deals.

Amid all this manic but articulate furore (typical of the compulsive attractions of South African society) Anglo Platinum (Angloplat) (JSE:AMS) (Johannesburg, South Africa), the world's largest producer of the metal, has been waiting since October 2000 to be given the department's authorization to go ahead on its $2 billion expansion program. The objectives of the company, the labor unions and black mining interests are now being met. Agreement has been reached in terms of which six of Angloplat's applications will be processed by the department. Four are for existing operations and two are in respect of expansion on the Twickenham and Der Brochen project areas. Angloplat's programs are scheduled to create 13,000 new jobs. The company's intention is to increase platinum production from the current 2 million ounces/annum to 3.5 million ounces by 2006.

In terms of the agreement two Black Economic Empowerment (BEE) groupings will acquire 50% ownership of discrete portions on each of the Twickenham and Der Brochen project areas that have been indentified as being able to support an independently managed stand-alone operation. A number of farms with proven high quality mineral deposits will be ceded to BEE groupings in the joint ventures. Anglo Platinum will independently own (100%) and develop other portions of the project properties. The designated BEE areas are at an advantage as ore bodies were not at extreme depths. The government has stressed that these BEE properties are of choice quality rather than leftovers.

This arrangement allows the BEE participants to exercise management decision-making and skills development and achievement of objectives through the whole range of mining operations and business and is a quantum advance from being hired guests at the board table. The arrangement also meets Angloplat's objectives of security of tenure of its current operations and the development of expansion projects.

To date Angloplat has negotiated significant BEE initiatives with Mvelaphanda Resources (JSE:MVL) (Johannesburg, South Africa) and African Rainbow Minerals (JSE:AODJ) (Johannesburg, South Africa) two of the black run genuine 'mover and shaker' companies in the mining industry. BEE groups who have qualified for 12 properties in the mineral rich eastern Bushveld complex of South Africa's Northern Province, will invest $350 million in developing new mining projects, some with foreign partners. Angloplat has also signed a $400 million joint venture with the Royal Bafokeng community to mine two farms near Rustenburg. The Bafokeng, who some years ago won back their ancestral rights to the land and mining rights, see their $200 million investment primarily as a means to generate revenue for the community. There main intention is commercial but if empowerment is boosted as a spin off it is seen as a fortunate bonus. These mines will peak with a production capacity of 5.4 million tons of ore/annum.