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Identifier
Created
Classification
Origin
04PRETORIA4831
2004-11-03 15:26:00
CONFIDENTIAL
Embassy Pretoria
Cable title:  

SOUTH AFRICA: FOREIGN MINING COMPANIES FILE

Tags:   ECON  EMIN  EINV  ETRD  SF 
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						C O N F I D E N T I A L SECTION 01 OF 02 PRETORIA 004831 

SIPDIS

DEPT OF TREASURY WASHDC

DEPT FOR EB, AF/S, AF/EPS
USDOC FOR 4510/ITA/MAC/AME/OA/JDIEMOND
DEPT PASS USTR FOR FLISER AND PCOLEMAN

E.O. 12958: DECL: 11/02/2014
TAGS: ECON EMIN EINV ETRD SF
SUBJECT: SOUTH AFRICA: FOREIGN MINING COMPANIES FILE
NOTICES RESERVING POSSIBLE LEGAL ACTION AGAINST GOVERNMENT

Classified By: Acting Econ Chief Alan Tousignant for reasons 1.4 (B, D)

C O N F I D E N T I A L SECTION 01 OF 02 PRETORIA 004831

SIPDIS

DEPT OF TREASURY WASHDC

DEPT FOR EB, AF/S, AF/EPS
USDOC FOR 4510/ITA/MAC/AME/OA/JDIEMOND
DEPT PASS USTR FOR FLISER AND PCOLEMAN

E.O. 12958: DECL: 11/02/2014
TAGS: ECON EMIN EINV ETRD SF
SUBJECT: SOUTH AFRICA: FOREIGN MINING COMPANIES FILE
NOTICES RESERVING POSSIBLE LEGAL ACTION AGAINST GOVERNMENT

Classified By: Acting Econ Chief Alan Tousignant for reasons 1.4 (B, D)


1. (C) Summary. Four foreign mining companies filed notices
on October 29 with the Department of Minerals and Energy
stating their intent to pursue legal action for mineral
rights potentially lost as a result of the implementation of
the Mineral and Petroleum Resources Development Act on May 1,

2004. The move was prompted by the "Legal Proceedings Act,"
which gives the companies six months after a government
action to file notice of a claim. The companies involved do
not view the procedure as tantamount to filing a lawsuit, but
rather as preserving their right to sue should the state
decide not to transfer their "old order" mineral rights which
were purchased from landowners to "new order" mineral rights
administered by the government. Nevertheless, the action did
not sit well with the Minister of Minerals and Energy, and
some believe that the action may not have been legally
necessary. End summary.


2. (U) Placer Dome (Canada), SouthernEra (Canada), Lonmin
(U.K.), and Aquarius (Australia, but incorporated in Bermuda)
filed notices on October 29 with the Department of Minerals
and Energy stating their intent to pursue legal action for
mineral rights potentially lost as a result of the
implementation of the Mineral and Petroleum Resources
Development Act on May 1, 2004. The companies involved do
not view the procedure as tantamount to filing a lawsuit, but
rather as preserving their right to sue should the state
decide not to transfer their "old order" mineral rights which
were purchased from landowners to "new order" mineral rights
administered by the government. The Department of Minerals
and Energy must transform "old order" rights into "new order"
rights by 2009.


3. (U) The move by the four foreign mining companies was

prompted by the Institution of Legal Proceedings Against
Certain Organs of State Act of 2002, which states "that no
legal proceedings for the recovery of debt may be instituted
against an organ of state unless the creditor has given the
organ of state in question notice in writing of its intention
to institute the legal proceedings in question." Further,
the creditor must serve a notice on the state within six
months from the date on which a presumed debt became due.
The Mineral and Petroleum Resources Development Act came into
effect on May 1, 2004 -- six months ago. At issue for the
companies is the prospect that the state will deny them "new
order" rights because of their failure to meet Black Economic
Empowerment (BEE) requirements as enumerated in the BEE
mining charter and incorporated into the new Minerals Act.


4. (C) Sam Coetzer, Managing Director for Placer Dome/South
Africa, explained to Econoff that he felt the company had
little choice but to file the notice. Since 1999, the
company invested $500 million in South Deep, a gold mine with
which it maintains a 50/50 joint venture with Western Areas.
Placer Dome shareholders will not agree to sell shares to a
BEE partner because it would mean relinquishing operational
control, which under its current arrangement, Placer Dome
retains. Its partner and original rights holder, Western
Areas, also refuses to reduce its shareholding in this
lucrative ultra deep mining venture. This automatically puts
South Deep in contravention of the BEE mining charter because
it does not have BEE partner. (Under the charter, companies
are supposed to take on a 15% BEE partner by 2009 and a 26%
BEE partner by 2014.) Placer Dome is worried that this could
be the basis for the government to deny the joint venture
"new order" rights. Despite many requests, it has not
received assurances from the government that its investment
in South Deep is secure.


5. (C) No South African based companies filed similar
notices. According to Coetzer, Bobby Godsell, Chief
Executive of AngloGold/Ashanti, argued at a Chamber of Mines
meeting the previous week that a legal move under the Legal
Proceedings Act was unnecessary. He believed that he could
still sue the state under the law at a later date, if he had
to, and that filing notice would only show a lack of trust in
the government. "This is a government of dialogue," he
reportedly argued. A Business Day editorial on November 2
also opposed the filings, arguing that since the loss, if it
existed, would only occur in 2009, it was hard to see why the
Legal Proceedings Act would apply now.

6. (SBU) The action by the foreign mining companies did not
sit well with Minister of Minerals and Energy Phumzile
Mlambo-Ngcuka, who reportedly told Placer Dome's Coetzer at a
Chamber of Mines breakfast on November 2, "If it is a fight
you want, then I'll show you how to fight." The next day,
Business Day quoted Minerals and Energy Director General
Sandile Nogxina saying, "I don't understand why they (the
four foreign companies) think they could be exempted from the
application of local law -- it's sheer arrogance."
Mlambo-Ngcuka is expected to address the issue in the media
soon.
FRAZER