Africa's Miners Face Standoff With Governments
By JOHN W. MILLER, DEVON MAYLIE And ALEX MACDONALD
CAPE TOWN—AngloGold Ashanti Ltd., the world's number five gold
producer, and a partner are considering a $400 million expansion in
Mali, a country with a per capita income of around $1,000 a year. But
with the country engulfed in conflict, the miner said on Wednesday it
would postpone the spending until fighting stops.
All over Africa, it is wait-and-see season for mining executives. At
the world's biggest mining conference here this week, top officials
from South Africa, the Democratic Republic of Congo and other
mineral-rich African countries sought to reassure mining companies
that they can offer a safe and profitable place to do business, amid
rising skittishness about tax hikes, labor strife and other issues
that have become central to mining on the continent.
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Agence France-Presse/Getty Images
Striking miners marched to the offices of Anglogold Ashanti in
Carletonville, South Africa, last October. Strikes and possible tax
increases have rattled miners operating in the country.
A few countries, including Mali, Guinea and especially South Africa,
which has the biggest mining industry on the continent, have emerged
as a lightning rod for industry concerns. South Africa is debating
whether to raise taxes on mining, cap coal exports and regulate
layoffs.
The paradox is that governments need mining companies for their tax
revenues as much as the companies need access to their resources.
Africa is too mineral-rich to just abandon.
South Africa Mining Minister Susan Shabangu said in a speech at
African Mining Indaba, the world's largest mining conference, that the
government understands taxes can't reach a level where South Africa no
longer competes with other top mining countries such as Australia and
Brazil. She also said nationalization "is not an option." The
conference, the world's largest, gathers 7,800 senior mining
executives, engineers and deal makers.
Ms. Shabangu's speech was closely watched by mining executives,
following a year of labor strife punctuated with the death last August
of 34 miners for London-based Lonmin PLC during clashes with police. A
fall in commodity prices driven by Europe's weak economy dented
profits has prompted discussions about shutting down or mothballing
some mines, which South African President Jacob Zuma on Monday
characterized as "blackmail." Foreign investment in the country fell
by 43.6% in the second half of 2012 compared with a year earlier. The
South African Rand is at a four-year low against the U.S. dollar.
Cynthia Carroll, CEO of Anglo American PLC, said in a speech that
miners need "regulatory stability." Mining companies, she said, have
to think decades ahead and "won't invest if there is a fear of onerous
and unpredictable regulatory change."
Governments across Africa are reassessing their taxes and trying to
determine how best to benefit from their natural resources while also
dealing with growing unrest—a rebel uprising in the Central African
Republic and troops in Mali—that have contributed to investor unease.
The Netherlands Development Finance Co. said it has been looking at
possible investments for the past year, but hasn't found any new
projects it wants to tackle.
Government officials in the DRC, known as the Congo, are completing a
review its mining regulations. The country, rich in copper, cobalt and
nickel, has been torn apart by civil conflict and corruption.
Madagascar is drafting a new law that is expected to boost the royalty
tax to between 5% and 10% for new projects from the current 2%.
"People feel they don't get benefit from mining and that could lead to
labor unrest," said Madagascar Minister of Mines Daniella Randriafeno.
"We need mining to spur growth. We want to make sure these resources
aren't a curse for us…we know companies will be scared and may leave
but we think they will come back," she said.
Mining companies warn that changes to mining laws will make some
operations unaffordable. Anglo American Platinum Ltd. Chief Executive
Chris Griffith said on Monday that if South Africa adds more taxes it
would be "detrimental."
AngloGold isn't alone in taking a cautious approach in Mali, where
France launched a military campaign last month to dislodge Islamist
militant groups—from towns in northern Mali.
"The situation may not get resolved as quickly as believed," said Gold
Fields Ltd. CEO Nick Holland, whose company is exploring for gold in
Mali. Gold Fields moved expatriates off its exploration site in Mali
while AngloGold CEO Richard Duffy said his company would delay
consideration of a new Mali project "until there is more clarity."
Brazil's Vale SA, the world's largest iron ore producer, in October
put an iron ore mine in Guinea on hold while awaiting a government
review of contracts. BHP also is reviewing its plans for its Mount
Nimba project in Guinea.
Guinea's minister of mineral resources Mohamed Fofana said that the
country is aware that the global investment climate is bad but that
the country needs to make sure companies are abiding by its laws and
regulations.
"Companies are moving to cut off their infected limbs" in Africa, said
Daniel Solomon Burnstein, a marketing manager for Cochrane
International, a security company which supplies mining companies with
fencing to protect themselves from theft and during labor unrest.
He added, "companies can't ignore Africa's natural resources, so what
we're seeing is companies moving around" the continent.
Africa sits on 80% of the world's platinum, 66% of its diamonds and
56% of cobalt, according to consultants and analysts. As such, mining
companies aren't expected to abandon the continent entirely, but are
expected to focus investment on those countries with more favorable
business climates, they add.
"If you're a serious mining company, you can't ignore Africa. There
are two major underexplored areas in the world, Africa and Siberia,
and Siberia is closed," says Magnus Ericsson, director for the Raw
Materials Group, a Stockholm-based consultancy. "We're seeing
explorations shifting from places like South Africa to Gabon, Cameroon
and other countries."
Mining officials are trying to promote their own country's advantages.
"[The Congo] is in civil war, while we have a real state," said
Edwards Katto Kagimba, commissioner for Uganda's geological survey and
mines department. Mr. Kagimba manned a booth at Indaba and handed out
geological maps and pamphlets detailing Uganda's mining laws.
Received on Wed Feb 13 2013 - 15:36:48 EST
