Executives from Sibanye Gold Ltd., South Africa’s biggest gold miner, were in Los Angeles in the final stages of a roadshow with U.S. bond fund managers last month when a bombshell hit from back home.
The government had introduced shock new rules requiring local mines to be 30 percent black-owned in perpetuity, toughening existing requirements and implying hefty dilution for shareholders. South African stocks tumbled and bond yields rose that day.
The measures, called Mining Charter 3, put at risk funding for Sibanye’s $2.2 billion acquisition of Stillwater Mining Co. of the U.S., the biggest foreign takeover by a South African mining company in 16 years.
“We had to hold back the financing, find out what the charter meant, and rebrief all our potential investors,” Chief Executive Officer Neal Froneman said by phone. “A number of institutional investors pulled out of the bond process saying the risks in South Africa were just too high and it’s becoming uninvestable.”
Companies and investors say the new rules and uncertainty will starve the industry of much-needed capital, shortening mine lives, reducing profits and adding to existing challenges of declining reserves and increasing costs. Most mining companies already offloaded 26 percent stakes and even entire mines to black investors at preferential rates in the 2000s to comply with previous rules, believing it was a one-time deal.
For the rest of this article: https://www.bloomberg.com/news/articles/2017-07-13/years-of-gridlock-face-south-africa-as-new-rules-paralyze-mining