IN 2002 ANGLO PLATINUM PURCHASED PROPERTIES UNDER LAND CLAIM IN THE PLATINUM RICH BUSHVELD COMPLEX IN SOUTH AFRICA WITH THE EXPRESS KNOWLEDGE OF HQ IN LONDON.
The recent shake out in the platinum industry in South Africa has exposed many of the inherent structural weaknesses of companies which make up this favored group of international miners.
In May this year, Eastern Platinum Ltd., of Vancouver the Canadian mid tier miner which made its debut on the South African platinum scene in 2004, announced that it was suspending further development of its platinum portfolio in the eastern limb of the bushveld complex.
Eastplats was formed in late 2003/2004 from the amalgamation of two Toronto venture exchange shell companies, Elgin Resources and Jonpol explorations.
Though the three main protagonists , Ian Rozier (CEO), David Cohen (Chair) and Gordon Keep (director) are long time mining associates and maintain close links with the Endeavour Financial group in Vancouver, there is certainly no legacy of PGM mining, nor prior expertise in this highly specialized area.
In addition, Eastplats appeared to have been under the impression that connected BEE would drive their theme. This, as events now start to unravel, has turned out to be a double-edged sword. Nor has the implications of such a view been fully taken into account, and is largely believed to be the thorn in Eastplats side which led to the announcement on Mareesburg and Kennedy´s Vale suspension.
At the outset, Easptlats had acquired mineral rights to three Platinum projects primarily through the deployment of high-profile BEE groups (Gubevu Consortium, Afriminerals and Lionshead Platinum) and then spent tens of millions of dollars buying out these fortuitous black businessmen in return for their “intermediary” services.
The title to the mining properties were previously held in the name of private farmers, who are acutely aware that when a land claim is present, they (the farmers) are obliged under the Restitution of Land rights Act (RLR) of 1994 to sell the land back to the State which in turn restitutes it to historically displaced indigenous communities.
However, it would seem, prior to the introduction of the minerals development act, the MPRDA of 2002 wherein ownership of minerals under the ground reverted to State, there was a flurry of real estate dealing.
Private land owners on mineral rich properties were hastily made offers by certain mining companies like Anglo American Platinum (Rustenburg Platinum) and Impala Platinum in this case, with the tacit consent of local government, to be allowed to sell the title to their mineral rich properties to mining companies at face value.
According to evidenced obtained by the deeds office in Pretoria, the prices were no higher than that which farmers could expect under the RLR, which was a take it or leave it offer. This in turn unleashed a string of frauds and led to the suspension of at least one commissioner in Mpumalanga around 2004.
In reality, these farmers should have been able to command a substantial premium over face (per hectare) value since they were not forced sellers. If a premium had been paid to these farmers over and above the transfer price, then such information may remain obscured given its potentially sensitivity in terms of what activities farmers were asked to perform in return for the payment.
One would have to come to the conclusion that the private farmers may have colluded with these mining companies to obfuscate matters, thereby keeping the lid on the existence of land claims on these valuable mineralized properties.
The presence of a land claim on these properties would have compelled farmers to sell their land to the state for restitution to the communities.
Problem solved for mining companies. This way, they would have avoided having to acknowledge and include communities in any meaningful way on their capital intense projects. Instead, the objective of the mining companies, it would seem, was to enhance bottom line at all costs by becoming the title holder and the mineral rights holder. Thereby, no permission to mine would ever have to be sought from historically disadvantaged people.
It is at this point critical to revisit the omissions allegedly perpetrated in 2002, by the world largest platinum miner, Anglo Platinum, with Barry Davison as its Chairman and CEO and why it ended up on a real estate buying spree, scooping up title to platinum bearing farms such as:
1) Mareesburg 8 JT on 14/05/2002( Sold by Bothmasburg Boerdery for R4,000,000.00 and purchased by Rustenburg Platinum for R3,750.000.00? (T112010) both transactions taking place in 2002, subsequently donated to Lionshead Platinum, passed on to Eastplats the Canadian Co.)
2)Der Brochen 7JT on 14/05/2002 (T112011/2002), purchased from a host of willing sellers, while a land claim was in progress on this key farm.
3) Two portions of the farm Schaapkraal 42JT (T21771/2003 &T21772/2003) which provided access roads to Booysendal also under land claim. Power line access to Der Brochen was routed over adjoining properties also under land claim and Eskom appears unwilling to produce the permission it needed to erect these lines.
4) Helena 6 JT (T13656/2007) purchased some years later but forming part of the Der Brochen complex.
Section 11(7) of the Restitution of Land Rights Act prohibits the disposal, lease, subdivision, rezoning or development of land under claim. We must then assume that Anglo Platinum operating under South African Law would be obliged to respect all laws pertaining to the country.
Anglo American Plc., in London at the time published this statement in their 2002 report.
“SOUTH AFRICAN BLACK ECONOMIC EMPOWERMENT
By far the most significant development during the year was the
debate over the draft legislation in South Africa regarding black
economic empowerment in the mining sector. A leaked draft of the
Mining Charter in July 2002 undermined investor confidence in
South Africa and caused great damage to the share price of Anglo
American. Since then, we, and the industry, have been working
actively with the South African Department of Mineral and Energy
Affairs to create a framework that will result in a mining industry
in South Africa that will benefit all.”
The imminent introduction of the MPRDA set the stage for a three-way showdown between the Department of Minerals and Resources (DMR), the Land Claims Commission and the mining majors, particularly Anglo American Platinum which by far held the majority of the old order platinum rights and stood the most to lose if the changeover actually amounted to the land claimants of mineralized property exercising constitutional rights which accompanied title to land. (surface right)
Scooping up title to platinum bearing farms (real rights now added to commercial mineral rights) from private owners as early as May 2002 while the leaked draft only appeared in July 2002 (according to Anglo´s above statement) was maybe a red herring to the investment market. In the very same annual report published in 2002 Anglo HQ in London upped their stake in Anglo American Platinum SA to 66.7% with the apparent confidence that all had now been tied up neatly and HQ had come out on top.
Was Barry Davison under pressure from HQ in London to find the silver bullet for the mighty Anglo American, irrespective of the cost to historically displaced communities and the ensuing decade of instability from mining communities which has resulted?
After many years of misinformation and delays from the Land Claim Commissioner (LCC) charged with processing claims for restitution, it has become evident of the weight of reliance which was being placed on the LCC. The department of Rural Development under which LCC falls is the sole dispenser and spokesperson on land claims which is particularly relevant for documentary communication on farms where surface rights compete with mining rights and there is a statutory reporting obligation.
Thus data emanating from LCC became inconsistent and unreliable despite being issued on a state letterhead as it is now evident that all and sundry in the industry had access to LCC. (LCC´s disclaimer states that the accuracy of such information could not be warranted.)
In cases where the mining company or their lawyers requested the status of a particularly valuable property from the commission they were sure to receive a “no claim” confirmation, thus leaving the mining company free to purchase the land directly from the white farmers.
When the claimant community requests the same information, it is told that the claim is being researched, while in reality it is being indefinitely delayed.
There was no reason for Anglo to want to purchase the properties it intended mining, other than to circumvent the real and other rights and consents required from indigenous communities (the claimants).
After all, these were lands that were taken away from communities, solely due to harsh and unjust apartheid policies.
Anglo could simply have entered into access agreements with land owners on commercial terms; but avoided doing so since this would have required negotiation and acknowledgement of participation and royalties to communities who had been dispossessed under the old regime.
Historical evidence compiled by leading archaeologists place communities on these properties from as early as the Iron Age, with specific evidence supported by graves and interviews from the rural people scattered over the properties. Anglo American operates in 61 countries worldwide, one can only wonder how many other communities worldwide is this happening to under the Anglo American umbrella?
But for the BEE´s, the high life has been expensive to maintain and none more so than Savannah Consortium, Aquarius´s and partially Eastplats empowered entity. While Aquarius shares rose to A$18 in 2008 from the subscription price of around $A2 in 2004 they have since plummeted to A$0.70 and tempers have become frayed with the closing of first the Blue Ridge mine, then the Marikana mine and finally the Everest South mine, followed by Eastplats´s Mareesburg and Kennedy´s Vale cutbacks.
Quite unbelievably, Aquarius is still in the process of applying for the mining right on the small Everest North project, some say a project perfectly suited to a community operation and that constitutionally and in the interests of repairing community relations, this project should revert back to the community.
When the market was robust, funding for these properties was a lucrative pursuit. To date, capital raising for listed venture market companies had been a winning wicket in Canada and London – Canaccord, GMP Securities, Macquarie Securities being the main beneficiaries here for Eastplats.
It had not been uncommon for a regular $200-$300m raising to be effected in one swoop, with use of proceeds being to develop potential mines or new money to recapitalize when the share price cratered as it did in 2008. Either way the funds kept rolling in enabling the funders to bank an astonishing 5% fee and a handy shot to the bottom line.
This party has pretty much been spoilt by the drop off in the platinum basket resale price – receipts from the sale of a basket of PGM metals – predominantly Platinum, palladium and Rhodium – to below the cost of production, an event which is a several years cyclical occurrence and often wreaks havoc with the balance sheet causing knee jerk reactions from mining companies such as Aquarius Platinum.
But more interestingly, it is the BEEs who have fired the first salvo of discontent. Others are eyeing developments with the utmost caution fearing a knock on the door from their financiers and a return of the prized shareholding which had been given as collateral.
Last week (28 June 2012), two of Aquarius Platinum main board directors, Zwelakhe Mankazana, member of the lucrative third mobile phone (Cell C) operator group and Kofi Morna, announced a disposal of a chunk of Aquarius BEE stock, some 7% of the issued capital which they “transferred” back to the original funder Rand Merchant bank.
This is a clear jump of a sinking ship since the shares were preferentially acquired (and paid for in 2004) at a price of A$2 when the Savannah Consortium stumped up ZAR865m to finance mine construction of Aquarius´s Everest South mine. The mine was taken out of production in June 2012 and the underlying asset subsequently impaired, which is why the bankers must have exerted pressure.
Eastplats has a similar story. A dizzying height of C$4.00 (TSX) in March 2006 to C$0.17 in June 2012 ascribing a virtually nil tangible value to their approx 100 000 oz p.a., Crocodile river mine, the Kennedys Vale project, the Spitzkop and Mareesburg project. The company has some $180m in cash and shares of 975m odd million shares fully diluted.
Therefore indigenous communities who have been given the opportunity to return to their ancestral lands might be facing a brighter future since the ill-conceived and grossly unjust system of privileged BEE consortium´s might already be undergoing a natural culling courtesy of market forces.
Mines in the central section of the bushveld´s eastern limb where Anglo has a dominant land holding, have much of the platinum orebody at the surface and the new generation mines which are under construction here will be substantially cheaper to operate, i.e Anglo´s Der Brochen Mine and Northam´s Booysendal Mine, leaving enough of the cake to be shared with long-suffering indigenous stake holders.
However, once mining rights have been obtained, there is a danger that these rights are being hoarded, sterilizing any potential growth and beneficiation opportunities which were fundamental issues of the license mandate. One should always bear in mind that the State is the custodian of the minerals under the ground and that mining companies only have a license to operate, extract and resell, they have no real rights to the land which is almost all under ancestral claim.
Thus the swathe of recent mine closures opens the possibility that new challenges will be mounted on a constitutionality basis by indigenous communities.
Arguments are likely to be put forward that shutting mines only benefits the license holder not the people of South Africa. This so because it allows the delineated resources in the ground to retain their intrinsic value on the mining companies´ balance sheets while no activity is taking place and no economic throughput is filtering back to the regions.
Descendants of ancestral land owners will see no growth, employment and skills development until the mining companies decide that financial ratios are more favorable for mining and it becomes opportune to return to their projects.
This is creating a highly unstable and unsustainable vacuum which could be populated in sheer numbers by the arrival of indigenous communities onto mining areas with a growing list of demands. Mining companies already weakened by fading revenues will have no choice but to eventually negotiate and integrate the communities into these operations in a meaningful way.
This is a space being keenly watched by people in power and all hidden beneficiaries whom mining companies may have had to pay their dues to, in order to shut out communities which had legitimately applied for the return of their lands.
Resolution of these land claims for communities will surely risk exposing those high-placed officials and mining bigwigs who have been able to pervert the course of land restitution and deny any justice to indigenous communities.
Communities remain in a cycle of squalid living conditions and an inability to generate enough to make a living or to contest their claims. These areas also manifest the highest unemployment and lowest skills base, a problem which can be fixed provided that those creating the blockage are excised.
As we understand it, many of the communities are starting to realize their greatest asset, tenacity and the will to continue fighting for their lands.
Another casualty, Australian miner, Platinum Australia, went into receivership. Platinum Australia is the owner of the Smokey Hills mine, an open pittable PGM deposit on the Eastern Limb of the bushveld. The Company had a poor reputation in terms of labor relations and in constant conflict with the surrounding communities, simply refusing to acknowledge their existence or rights; pretty much like Anglo Platinum in the early 2000´s under the stewardship of Barry Davison.
Therefore Platinum Australia´s demise was no surprise to those on the ground. It was a mine brought to its knees by those who were denied rights to earn a living from their lands. Another market culling forced by withering PGM margins. One can only imagine the carnage had Platinum Australia been a deeper mine, it wouldn’t even have made it past the starting block.
So why then are Platinum Miners so reluctant to engage with surface right holders and those waiting to receive their restituted lands back?
There are many sides to this question. But bear in mind that those at the helm of these companies can talk a good story, are academically pedigreed and have serious connections in the funding world.
Platinum Australia counted the legendary Soros Fund Management (SFM) as its institutional investor until several months ago when SFM cut its holding at A$ 0.30 and beat a retreat.
The South African BEE concept has been a dismal failure as it supported a small group of people, funded by listed companies looking for cheap labor and quick profits, while the rest of the region where mining takes place is plagued by poverty and uncertainty.
There appears to have been a total neglect on the companies mentioned to have implemented “real” broad based empowerment, namely upliftment of indigenized communities whose land the prospecting and mining will be focused on for generations to come.
Barry Davison, (known by the locals as the barking bulldog with false teeth) has since moved on and left his legacy for a woman at the helm.
Cynthia Carroll has come under increasing attack for the size of her remuneration (AGM 2012) and in particular the payment of a bonus which increased by a whopping (134pc) in an industry where funding from the public markets is motivated by the quality of assets situated on indigenous peoples lands who are unlikely to see any meaningful benefit from mining and destruction of their habitat.
Alleviating poverty in the platinum rich bushveld complex would probably cost less per annum than Ms. Carroll´s annual take home pay.
No comments:
Post a Comment