May 17, 2020

The implications of the new look South African Mining Charter

South African mining
mining legislation
mining gov
5 min
The implications of the new look South African Mining Charter
Off the back of the recent Johannesburg Mining Indaba, speakers still despair at the state of the South African mining industry. Once the leading econom...

Off the back of the recent Johannesburg Mining Indaba, speakers still despair at the state of the South African mining industry.  Once the leading economic sector in South Africa, mining revenues have tumbled in recent years as global commodity prices have suffered with the downturn in Chinese demand, coupled with labour problems and the wider macro-economic problems in South Africa.  All this has led analysts to predict that up to 50,000 jobs will be lost in the South African mining industry in this year alone.

Against this backdrop, the Minister of Mineral Resources is pushing to finalise revisions to the country's Mining Charter; focussing on restructuring Broad Based Black Economic Empowerment ("BBBEE") transactions in the South African mining industry.

The original Broad Based Socio-Economic Empowerment Charter for the South African Mining and Minerals Industry (the "Mining Charter"), published in August 2004, sought to address the issue of the participation of historically disadvantaged South Africans in the mining sector.  But it is not as clear in its requirements as the subsequent BBBEE legislation and codes which were introduced in 2007 and which set out the various targets that have to be met by businesses operating in South Africa. 

So-called "Trumping Provisions" have more recently been enacted that stipulate that in the event of any conflict between BBBEE legislation and any legislation already enacted, the BBBEE legislation should prevail.  However, the mining and minerals industry was given an exemption from the Trumping Provisions to allow the sector more time align with the provisions of the BBBEE legislation.  This exemption runs out towards the end of October 2016.  Hence the need for action.

Revisions to the Mining Charter were published for public comment in April 2016 and commentators have focussed on the new requirement, which applies retrospectively, for each mining operation to have at least 26% ownership by an empowerment partner in perpetuity.  This would mean that where a black empowerment shareholder sells its shares, the company must replace that shareholder with other black empowerment shareholders within three years, to ensure the ratio of 26% is maintained.  This contrasts with the principle of "once empowered always empowered" – a principle followed in the industry which is currently being considered by the High Court in South Africa.

The draft Mining Charter also looks to formalise the structure of black participants via a single special purpose vehicle, develops requirements in respect of housing and living conditions for mine employees and increases "local content" requirements in the procurement of capital and consumable goods.

No-one questions the importance of advancing black participation in the South African mining industry and the value of harmonising legislation on this topic, but there is concern that the draft Mining Charter may have other implications for the mining sector at a time when it is already struggling.  Key amongst these are the following:

  • the proposed changes have created further uncertainty and unpredictability around the ongoing debate on BBBEE in the mining sector;
  • there are potential costs arising from the proposed restructuring of black empowerment shareholders via a SPV structure;
  • there are complex tax implications associated with the BBBEE which will need to be considered carefully;
  • existing empowerment transactions are likely to need to be refinanced to comply with the structural requirements and there may be difficulties in obtaining this funding in the future;
  • companies could be forced to tighten the lock-in provisions for BBBEE participants and generally the transfer of shares is likely to become more illiquid;
  • clearly there will be costs of complying with the much needed improvement in housing and living conditions which fall on the mining companies again with complex tax implications; and
  • failure to meet the required targets could results in automatic non-compliance with the draft Mining Charter and the risk of suspension or cancellation of rights or even criminal prosecution,


All of this is likely to further challenge investor confidence in an already depressed sector.  The much needed positive signals for the mining industry in South Africa still seem to be missing at this point.

The mining sector in other African countries is facing similar constraints caused by the downward trend in commodity prices – how have their governments reacted to the challenges?  It is fair to say that the reaction is mixed – which is to be expected from a continent comprising 54 different countries.  Botswana continues to be a highly attractive location for international investment in the mining industry – with a stable, well understood and defined licensing system.  Namibia also has an attractive story to tell to international investors with a positive approach to the regulation of the mining industry – although recent BBBEE legislation will mean that ownership structures may need to be adjusted going forward.

In contrast, mining in countries such as Zambia has struggled with a government flip-flopping around increasing royalty rates.  This echoes the trend in other African jurisdictions where populist governments need to demonstrate to their electorate that citizens are benefitting appropriately from the mining sector.  This trend has seen a variety of jurisdictions attempt to bolster their revenues from the mining sector in the face of falling commodity prices by looking to increase royalty rates (for example in Zambia and Tanzania) or demand an increase in ownership in mining companies (for example, this has been on the agenda in Guinea, Mali and Zimbabwe) – all of which again has the inevitable negative impact on investor confidence – although the governments of Zambia and DRC, for example, recognising the pressure the industry is under have adopted a more realistic approach to regulatory changes.   The trend in resource nationalisation is not unique to the African continent and has also been seen in places such as Australia.

The depressed nature of the South African mining sector looks set to continue with the proposed Mining Charter likely to add to costs and uncertainty in the short term compounded by the macro-economic factors affecting South Africa.  Whilst many jurisdictions are facing similar challenges due to the fall in commodity prices – it seems clear that countries in Africa can encourage investment in mining through the policies of their governments.  Integrated government policies linking resource development to infrastructure and power availability can have a significant impact on the sector and governments looking to encourage investors will aim for a transparent, clear and stable regulatory framework and efficient bureaucracy,  free of inconsistencies and ambiguity.

The October issue of Mining Global Magazine is live!

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Get in touch with our editor Dale Benton at [email protected]


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May 7, 2021

Lithium producers bullish as EV revolution ramps demand

Electric Vehicles
3 min
Lithium producers are drawing optimism from rising prices for the electric vehicle battery metal

Rising demand for lithium is stoking prices for the electric vehicle battery metal, fueling long-delayed expansions that still may not produce adequate supplies that automakers need to meet aggressive production plans.


Growing industry optimism from higher lithium prices is a change from last year when funding for mines and processing plants dried up during the pandemic.

Albemarle Corp, Livent Corp and other producers are scrambling to make more lithium, but some analysts worry the recent price jump will not spur a big enough expansion to meet a planned wave of new EV models by mid-decade.

Since January, General Motors Co, Ford Motor Co LG Energy Solution and SK Innovation Co, along with other automakers and battery parts manufacturers, have said they will spend billions of dollars on EV plants.

U.S. President Joe Biden has proposed spending $174bn to boost EV sales and infrastructure. The European Union has similar plans, part of a rush to catch up with global EV leader China.

Those moves have helped an index of lithium prices jump 59 percent since April 2020, according to data from Benchmark Mineral Intelligence, a commodity pricing provider.

The rising demand “reflects what feels like a real and fundamental turning point in our industry,” said Paul Graves, chief executive of Livent Corp, which supplies Tesla Inc. On Monday, it said it would more than double its annual lithium production to 115,000 tonnes.

Graves warned, though, that “it will be a challenge for the lithium industry to produce sufficient qualified material in the near and medium term.”


Albemarle, the world’s largest lithium producer, aims to double its production capacity to 175,000 tonnes by the end of the year when two construction projects are complete. Albemarle's Q1 profit beat expectations thanks to rising lithium prices. Chile’s SQM, the No. 2 producer, said its goal to expand production of lithium carbonate by 71 percent to 120,000 tonnes should be complete by December.

Australia’s Orocobre is paying $1.4 billion for smaller rival Galaxy Resources, a strategy designed to boost scale and help it grow faster in regions closer to customers.

“The next few years are going to be critical in terms of whether there’s enough available lithium supply, and that’s why you’re starting to see commodity prices start to ramp,” said Chris Berry, an independent lithium industry consultant.

The price gains helped Albemarle and other major producers, including China’s Ganfeng Lithium Co and SQM, post big gains in first-quarter profit and boost forecasts for the year.

Even China’s Tianqi Lithium Corp, saddled with debt due to years of low lithium prices, signaled that recovering demand should help it swing to a profit this year.

Electric Vehicles

Forecasts call for demand for the white metals to surge from about 320,000 tonnes annually last year to more than 1 million tonnes annually by 2025, when many automakers plan to launch new EV fleets, according to Benchmark.

Still, demand is expected to outstrip supply in 2025 by more than 200,000 tonnes, so lithium prices may need to rise to encourage producers to build more mines. That could boost the prices consumers pay for EVs. “Companies across the lithium-ion supply chain are in the best position they’ve been in for the last 5 years,” said Pedro Palandrani of the Global X Lithium & Battery Technology ETF , which has doubled in value in the past year.

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