South African government seizes control of future deals involving mining groups

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The Independent Online

Whether they are mega-mergers between the world's biggest natural resource companies or hurried stitch-ups between Aim-listed prospectors at the fag end of the industry, they are about to become a lot more difficult.

South Africa's Mineral and Petroleum Resources Development Amendment Bill requires any change in control of a mining concession in the country to be submitted to the country's minister of mining, currently Susan Shabangu, for approval.

Crucially, lawyers say that an amendment exempting quoted companies has been removed from the legislation, which has been passed into law but not yet enforced.

However, when it is, they warn that transactions involving South African mineral rights will become hugely more complicated – not least because no time limit has been specified for decisions. It means that if there is even a hint of controversy surrounding a sale of even a small percentage of a concession, it could get kicked into the regulator long grass for weeks, or even months. The law would also effect any M&A activity even if only one of the parties has even a small holding in the country.

Peter Leon, a partner at Webber Wentzel Bowens in Johannesburg, said: "Under the bill, there can't be a transfer of any interest in a mining right without the minister's permission. There is now a great rush to get things through before the law is enforced."

Mr Leon, who is the chairman of the mining law committee of the International Bar Association, continued: "There was no good reason given for removing the exemption for quoted companies and the concern is that what it means is that the mining ministry now has regulatory control over mergers. This should be a matter for competition authorities. It creates an additional hurdle that companies have to clear before going through a merger."

Mr Leon said he believed the law breached best international practice, and that the motivation behind it was to give ministers in the South African government more control over resource-related transactions.

Theoretically, then, Xstrata – understood to have been lobbying heavily in South Africa during its attempt to takeover Anglo American, could find a second attempt at its giant rival far more difficult and complicated because of the new regulatory fences it will have to jump in six months time. That is the period, under Takeover Panel rules, after which it is free to make a fresh approach.