An adverse amendment

A feature of the Draft Taxation Laws Amendment Bill may hamper junior miners. Minerals Council SA is requesting reconsideration from National Treasury to avert a negative impact on the industry.

By David McKay

South African mining has recently suggested there are grounds for hope that the government will respond positively to reform proposals placed before it by Business Leadership SA’s B4SA.

Roger Baxter, CEO of Minerals Council SA, which contributed the mining sector slides to B4SA’s presentation to government, said visible signs of policy improvement could be seen within six months. A proposal, for instance, to incentivise exploration investment via tax benefits attached to so-called flow-through shares, could be met with a favourable response before October, he said.

Roger Baxter CEO of Minerals Council SA

Unfortunately, the government ‘policy’ doesn’t appear to be either homogenous or synchronous. While National Treasury may view flow-through shares positively, it tabled the Draft Taxation Laws Amendment Bill in July that may frustrate junior mining.

Addressing the tax treatment of allowable mining capital expenditure where mining services are provided through contractors, the draft amendments say only mineral right holders can benefit from accelerated depreciation; in other words, not the contractor miners. “It is anti-junior mining as it is junior miners who are most capital-constrained and are most likely to need contractors,” said Paul Miller, a former mining company CEO.

Errol Smart CEO of Orion Minerals

“I hope the amendments are more a case of being poorly drafted (than policy),” said Errol Smart, CEO of Orion Minerals, which is building the R4.5bn copper-zinc project near Prieska in SA’s Northern Cape province (see sidebar). “I don’t know whether our project would have got going with these laws,” he said.

Said the Minerals Council when asked about the draft amendments: “The Minerals Council will be making a submission to National Treasury on this feature of the Draft Taxation Laws Amendment Bill, pointing out that it will have an adverse impact on the industry and requesting a reconsideration.”

There’s also some confusion about whether the department of mineral resources and energy’s (DMRE’s) decision to withdraw an appeal regarding the ‘once empowered, always empowered’ clause in the 2010 Mining Charter is a benign move or not.

Styled by the Minerals Council as evidence that reform was being supported by the DMRE, the decision to drop the appeal over the High Court’s decision relating to the 2010 Mining Charter is so it can contest an industry interpretation of once empowered, always empowered as contained in the 2018 Mining Charter, according to a note by Fasken, a law firm. ■

editorial@finweek.co.za

Orion’s touching the skies

Shares in the JSE’s Orion Minerals have nearly doubled in value since the start of August, which is timeous as the firm is thought to be in the final stages of equity financing the Prieska copper-zinc project.

This followed the grant of a mining permit over the remainder of Orion’s Northern Cape property which Errol Smart, CEO of the company, says has been delivered in double-quick time and is a reminder that when minded, South Africa’s mining regulatory environment can be a force for good, not frustration.

“My biggest fear, the one thing that kept me awake at night, was that it would take six to nine months to get the permit,” he told finweek in an interview. Now is the time to be financing and building mines in SA with infrastructure development fresh in the collective mind of President Cyril Ramaphosa’s economic cluster.

Smart says the Northern Cape licensing office of the DMRE has been responsive and efficient, and quite unlike some offices in Australia where Orion Minerals also has exploration properties. “We criticise SA all the time, but you can go months on end without hearing from any (official) one in Australia,” says Smart.

Expect, then, more upward momentum to Orion shares when the financing is in place and assuming economic recovery after Covid-19 remains supportive of base metal prices which feed industrial growth. Smart wants the mine, proposed to do 22 000t of copper and 70 000t of zinc annually over 12 years, to start construction in the first quarter of next year. ■