South African Mining Development Association

1 PCTI/20140826/CoB/SAMDA/32. South African Mining Development Association Submission to the Portfolio Committee on Trade and Industry 26 August 2014. 1. South African Mining Development Association The South African Mining Development Association was started in 2000 as the Junior Mining Initiative by South African junior and black economic empowerment (BEE) Mining investors. While the founders' initial impetus was to present a united response to government on the Minerals Bill, the need for a strong, permanent lobby, representative of the interests of junior Mining companies on several fronts, soon became apparent. The need for and support of such a body was confirmed subsequently by research conducted by the Minerals and Energy Policy Centre (MEPC). In the research conducted by the MECP on the junior Mining sector the following definition of junior Mining companies was concluded. Junior Miners are companies with an Asset base of R50 million to R7 billion.

2 Above R7 billion are the majors. Below R50 million are Small Scale miners. Below the small scale miners are the Artisanal miners. 2. South African Mining Development Association Vision SAMDA's vision is to be the vehicle for the Development of a vibrant and sustainable junior Mining sector which contributes towards the growth and prosperity of the Mining industry. Mission to create an enabling environment for raising finance;. developing technical and other skills;. practicing responsible environmental management and sustainable Development ; and the maintenance of standards of good practice in the junior Mining sector To Lobby;. government;. organised labour; and other stakeholders and institutions to promote mutual understanding to encourage local and international investment to conduct research to understand the sectors needs to promote beneficiation to build African and global alliances and to facilitate the transformation of the Mining industry by promoting emerging junior Mining operations and those who are historically disadvantaged.

3 3. Historically, Investments in Mining had an exploitation culture in Africa The Resource curse: Eg: Case Study South Africa Militant labour No black force fighting ownership exploitative labour practices Monopolistic industry in South Africa No royalty pre 1994 payments to Ghost towns rural communities Neo-colonialism 4. The Mining Industry to Graduate from the following Historic Mining Investment Model: Explore + Extract + Exploit + Export = Ghost Towns + Resource Curse From Exploited Mining Environment To Sustainable Mining Environment Massacres and Ethnic Cleansing Rape as a Weapon of war Conflict Diamonds the Root of all Evil WHAT IS BENEFICIATION? Broad-Based Socio-Economic Empowerment Charter For The South African Mining And Minerals Industry Beneficiation means the transformation of a mineral (or a combination of minerals) to a higher value product, which can either be consumed locally or exported.

4 The term beneficiation is often used interchangeably with mineral value-addition or downstream beneficiation . Beneficiation seeks to translate comparative advantage in mineral resources endowment into competitive advantage as fulcrum to enhance industrialization in line with State developmental priorities. In this regard, Mining companies must facilitate local beneficiation of mineral commodities by adhering to the provision of Section 26 of the MPRDA and the mineral beneficiation strategy: Mining companies may offset the value of the level of beneficiation achieved by the company against a portion of its HDSA ownership requirements not exceeding 11 percent. 7. Mineral Beneficiation Section 26. of the MPRDA. Section 26. (1) The Minister may initiate or prescribe incentives to promote the beneficiation of minerals in the Republic. (2) If the Minister, acting on advice of the Board and after consultation with the Minister of Trade and Industry, finds that a particular mineral can be beneficiated economically in the Republic, the Minister may promote such beneficiation subject to such terms and conditions as the Minister may determine.

5 (3) Any person who intends to beneficiate any mineral mined in the Republic outside the Republic may only do so after written notice and in consultation with the Minister. 8. Section 100 (2)(a). of the MPRDA. Section 100. (2) (a) To ensure the attainment of Government's objectives of redressing historical, social and economic inequalities as stated in the Constitution, the Minister must within six months from the date on which this Act takes effect develop a broad-based socio-economic empowerment Charter that will set the framework, targets and time-table for effecting the entry of historically disadvantaged South Africans into the Mining industry, and allow such South Africans to benefit from the exploitation of Mining and mineral resources. 9. ELEMENTS OF THE CHARTER - A TOOL TO REALIZE THE. NATIONAL Development PLAN VISION FOR 2030. The Elements of the Mining Charter are some of the Mining Economy's National Development Plan tools in eliminating poverty and reducing inequality by 2030.

6 IN SECTION 100 (2)a OF THE MINERALS AND PETROLEUM RESOURCES Development ACT, THE. Mining CHARTER WAS CREATED as a historic charter for the transformation of the Mining sector that would introduce elements of sustainable growth of the Mining industry, with the intention to ensure transformation of the Mining industry. Below are the elements of the Mining Charter: Ownership - 26% equity participation by May 2014. Procurement and Enterprise Development Beneficiation Employment Equity - 40% black managers by May 2014. Human Resources Development Skills Development Spend by May 2014 should be 5% of payroll 10. ELEMENTS OF THE CHARTER - A TOOL TO REALIZE THE. NATIONAL Development PLAN VISION FOR 2030. Mine Community Development through Integrated Development Plans and Social and Labour Plan Housing and Living Conditions Requirements: - To attain the occupancy rate of one person per room by 2014;. - To upgrade or convert hostels into family units by 2014.

7 - To promote home ownership. Sustainable Development through: - Environmental Management Plan - Rehabilitation - Waste Removal and Storage - Improve Health and Safety Performance 11. Ownership - 26% equity participation by May 2014. The Charter requires a minimum effective participation of 26% by HDSA by the 1st of May 2014. The current Ownership Structure is a neo-colonialist ownership model that perpetuates ownership of the country's resources and mines by foreign investor monopoly. 26% Broad Based Black Economic Empowerment Ownership through Unencumbered Net Value in the Mining industry by 2014 has not been reached by the majority of the Mining companies. Many of The Broad Based Black Economic Empowerment investors that have not yet realized 26%. unencumbered net value by the 1 May 2014 as prescribed by the Mining Charter through section 100 (2). a of the MPRDA are the following: Employee Ownership Schemes (ESOPs).

8 Community Trusts Broad Based Business Trusts BEE Technical Producers Women In Mining Youth In Mining People living with Disabilities Ownership is still unrealised in the majority of Broad Based Black Economic Empowerment transactions. 12. Ownership - 26% equity participation by May 2014. According to the research of the JSE Top 49 Mining Companies conducted by SAMDA In 2014. The market capitalisation of the Top 49 JSE-Resources companies is R2,574 trillion (100% of the resources sector's value on the JSE main board). The charter requires a minimum effective participation of 26% by HDSA in each of the 49. listed companies If all the Top 49 Listed Mining Companies had 26% HDSA ownership of R2,574 trillion the value would have been R669 billion HDSA participation in 2014. The majority of black producers do not own mines because the shareholding has not been paid up due to Transfer Pricing 13. The Majority Of The JSE Top 49 Mining Companies Has A.

9 Charter Non-Compliant Ownership Profile (2013/2014). Ne t Va l u e HDSA Gross HDSA Net Value as %. Number Name Market Cap (Rm). Interest % Value (Rm) Yes / No Value (Rm) of Market Cap 1 Afri ca n Ra i n b ow Mi n e ra l s Ltd . 47 310 26 021 Ye s 26 021 2 As s ore Ltd . 55 642 14 523 Ye s 14 523 3 I mp a l a Pl a ti n u m Hol d i n gs Ltd . 72 983 10 656 Ye s 10 656 4 Roya l Ba foke n g Pl a ti n u m Ltd . 10 380 5 930 Ye s 5 930 5 Atl a ts a Re s ou rce s Corp ora ti on 2 601 1 431 Ye s 1 431 6 Pa n Afri ca n Re s ou rce s PLC 4 880 1 269 Ye s 1 269 7 Ha rmon y Gol d Mi n i n g Comp a n y Ltd . 14 191 2 092 Ye s 2 092 8 Me ra fe Re s ou rce s Ltd . 2 469 716 Ye s 716 9 Gol d Fi e l d s Ltd . 30 243 696 Ye s 696 10 Si b a n ye Gol d Ltd . 11 644 268 Ye s 268 11 We s coa l Hol d i n gs Ltd . 422 145 Ye s 145 12 Vi l l a ge Ma i n Re e f Ltd . 406 93 Ye s 93 13 Fi re s ton e En e rgy Ltd . 248 64 Ye s 64 14 I n fra s ors Hol d i n gs Ltd.

10 204 58 Ye s 58 15 Wi twa te rs ra n d Con s ol i d a te d Gol d Re s ou rce s Ltd . 366 36 Ye s 36 16 Exxa ro Re s ou rce s Ltd . 53 667 18 461 No 0 17 North a m Pl a ti n u m Ltd . 16 559 4 405 No 0 18 Pa l a b ora Mi n i n g Comp a n y Ltd . 5 544 1 441 No 0 19 An gl oGol d As h a n ti Ltd . 65 534 1 245 No 0 20 An gl o Ame ri ca n Pl a ti n u m Ltd . 119 391 1 194 No 0 21 Aq u a ri u s Pl a ti n u m Ltd . 3 428 521 No 0 22 Pe tmi n Ltd . 1 137 273 No 0 23 Coa l of Afri ca Ltd . 1 153 122 No 0 24 Tra n s He x Grou p Ltd . 444 91 No 0 25 We s i zwe Pl a ti n u m Ltd . 1 270 76 No 0 26 Se n tu l a Mi n i n g Ltd . 194 33 No 0 27 Bu i l d ma x Ltd . 453 31 No 0 28 Gl e n core Xs tra ta p l c 783 691 0 No 0 29 BHP Bi l l i ton Pl c 700 947 0 No 0 30 An gl o Ame ri ca n p l c 364 817 0 No 0 31 Ku mb a I ron Ore Ltd . 144 501 0 No 0 32 Lon mi n p l c 32 084 0 No 0 33 Arce l orMi tta l Sou th Afri ca Ltd.