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‘Very tough’ mining year ahead as ‘lawfare’ breaks out – Nedbank

Nedbank mining finance principal Paul Miller

Nedbank international mining finance head Nivaash Singh

Photo by Duane Daws

23rd January 2017

By: Martin Creamer

Creamer Media Editor

     

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JOHANNESBURG (miningweekly.com) – South African mining has a “very tough” year ahead, with "lawfare" breaking out.

While existing large, powerful mining companies will persist, growth through new entrants and foreign investment is highly unlikely this year, resulting in escalating opportunity loss.

“There’s a very real chance that we’re going to do further damage to our mining industry, simply because South Africa Inc doesn’t seem to have got its head round what it wants from its mining industry,” Nedbank mining finance principal Paul Miller told journalists on Monday in a webcast in which Mining Weekly Online took part.

While Nedbank international mining finance head Nivaash Singh said 2016 was "a remarkably successful year for Nedbank", in which it closed 24 mining debt financings at a collective deal value of R20-billion across ten African countries in precious metals, base metals and industrial minerals, Miller said South Africa’s regulatory environment concerned him greatly, and it was poised to worsen in the run-up to the African National Congress leadership battle and the 2019 national election.

Singh said that the credit appetite of Nedbank, now in an expansionary phase, remained healthy and consistent, with the company actively growing its lending franchise in Africa, where it has 20% of the pan-African banking conglomerate Ecobank - but Miller lamented that the South African economy risked missing out on the gradual improvements occurring in several sectors of the global commodities markets, from which it could and should benefit.

“The next 12 to 18 months are stacking up to be some of the most volatile and uncertain times ever experienced by our country’s mining sector,” Miller reiterated, charging that uncertainty, discretion and the absence of timelines were allowing Department of Mineral Resources (DMR) officials to apply vague guidelines through a political lens.

While for certain companies the transfer of ownership approvals were granted within weeks of application, Section 11 applications of the Mineral and Petroleum Resources Development Act (MPRDA) were dragging on and on for others.

“The process is inherently uncertain and no number of new versions of the Mining Charter are going to change that until we go right back and say we actually want certainty on timelines and on the requirements of how decisions are made and what the industry must do to get a decision out of the DMR,” he added.

Had the DMR any shame, the recent Labour Court and High Court judgments would, he said, have resulted in heads rolling but instead appeals were being filed.

New rehabilitation regulations had been so badly redrafted that they were likely to be set aside, a fate the Mining Charter could potentially also suffer in the wake of the upcoming Malan Scholes legal challenge.

With mining at their heart, a multitude of legal battles were set to ensue around the Public Protector’s 'State of Capture' report, and the mining sector was finally being forced to find its voice and assert itself against the excessively egregious potential effects of the reviewed charter and the amended MPRDA.
 
Miller's view is that the days of quiet diplomacy are well and truly over against the backdrop of mining being too important not to make its voice clearly heard in the coming months and years and "lawfare" breaking out across a broad front.

Meanwhile, Nedbank’s international mining finance business is continuing to do well, with its international mining project finance transactions including Paladin’s Langer Heinrich uranium project financing in Namibia; Paladin’s Kayelekera uranium project financing in Malawi; Gem Diamonds' Ghaghoo project financing in Botswana; Sierra Rutile’s corporate debt facility in Sierra Leone; Aureus Mining’s New Liberty gold project in Liberia; and Oceana Gold’s debt refinancing in the Philippines.

In a five-year break from banking some time back, Miller headed a team that took a greenfield exploration company from first exploration drill hole to first production in three years, listing and then raising finance from the public markets and project finance from banks. He grew the company from six employees to 1 400 employees and contractors across two producing mines by the time he returned to banking in 2013.

Edited by Creamer Media Reporter

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